EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
i^enaiL'
of tl;r
SENATE
S.B. NO. 219
*19 
JUL “ 3 P7--04
RECEIVED C-
Introduced by SENATOR IMEE R. MARCOS
AN ACT
RATIONALIZING VALUE-ADDED TAXATION TO ADDRESS INTER- 
GENERATIONAL POVERTY, AMENDING FOR THE PURPOSE 
SECTIONS 109,197, AND 288 OF THE NATIONAL INTERNAL 
REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES
EXPLANATORY NOTE
Poverty continues to be the greatest problem faced by the majority of 
Rlipinos. Wome, inter-generational poverty keeps families locked in the spiral of 
hand-to-mouth existence. To break the cycle, this measure seeks to provide 
substantial opportunities, and critical welfare support, that uplifts the poor by 
earmarking the proceeds from the Value Added Tax (VAT) for basic services needed 
by the first to seventh deciles.
At the same time, this measure will promote greater economic productivity 
and efficiency through the streamlining of the VAT to exempt: (a) goods and 
services provided to schools; (b) school pap>er products; (c) drugs and medicines; 
and (d) electricity and machines used in generation, transmission, and distribution; 
as well as increase the VAT Threshold from Three Million Pesos to Rve Million Pesos. 
The latter will create a nurturing environment for businesses to expand, and 
stimulate the growth and development of Small and Medium Enterprises (SMEs), 
while increasing the ease of administration for the Bureau of Internal Revenue.


Ultimately, the welfare of the people is greatly enhanced by giving life to the 
Supreme Court's land mark decision in Congressman Hermilando I. Mandanas 
E t A! versus Executive Secretary which stated that the 'just share' of local 
government units under Section 6, Article X of the 1987 Constitution is based on all 
national taxes and not only on national internal revenue taxes, as provided in 
Section 284 of the Local Government Code. In line with this, this measure revises 
the status quo where 50% of the incremental proceeds of VAT shall be spent for 
specified purposes. Instead, the bill earmarks the 60% share of the National 
Government from total VAT proceeds for (a) public schools; (b) indigent insurance; 
(c) environmental conservation; (d) agricultural modernization; (e) food vouchers; 
and (f) social mitigation measures, and allows the local governments to enjoy full 
autonomy over the expenditure of their 40% VAT share.
The passage of this bill is earnestly sought in order to advance the 
development of the country and the upliftment of our country men.
IMEE R. MARCOS
1 G.R. No. 199802, July 03, 2018 and G.R. No. 208488, July 3, 2018


EIGHTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
©ttiif Jf tiji- i&i'crftsrp
■19 
JUL-3 P 7 « 4
SENATE
S. B. NO.
219
RECtiV..D i>'
T
In trod uced by SENATOR IMEE R. MARCOS
AN ACT
RATIONALIZING VALUE-ADDED TAXATION TO ADDRESS INTER- 
GENERATIONAL POVERTY, AMENDING FOR THE PURPOSE SECTIONS 
109, 197, AND 288 OF THE NATIONAL INTERNAL REVENUE CODE, AS 
AMENDED, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House o f Representatives o f the 
Philippines in Congress assembled:
1
2
3
4
5
6
7
8 
9
10
11
12
13
14
Section. 1 Declaration of Policy. It is hereby declared the policy of the
State:
a) To enhance the progressivity of the tax system through the rational 
imposition of the value-added tax (VAT);
b) To provide relief to the poorest of the poor by making VAT exempt: (a) 
goods and sen/ices provided to schools; (b) school paper products; (c) 
drugs and medicines; and (d) electricity and machines used in 
generation, transmission, and distribution;
c) To encourage and enhance the competitive capacity of Small and 
Medium Enterprises (SMEs) by raising the VAT threshold; and
d) To ensure intergenerational poverty alleviation and the sustainability of 
free higher education by earmarked funding for development programs.


1 
Sec. 2. Section 109 of the National Internal Revenue Code (NIRC) of 1997,
2 
as amended, is hereby further amended to read as follows:
3 
"SEC. 109. Exempt Transactions. -  (1) Subject to the provisions of
4 
Subsections (2) hereof, the following transactions shall be exempt from the
5 
value-added tax:
6 
"(A)" XXX
7 
"(B)" XXX
8 
"(C)" XXX
9 
"(D )" XXX
10 
"(E)" XXX
11 
"(F)" XXX
12 
"(G)" XXX
13 
"(H )" Educational services rendered by private educational institutions,
14 
duly accredited by the Department of Education (DepEd), the Commission on
15 
Higher Education (CHED), the Technical Education and Skills Development
16 
Authority (TESDA) and those rendered by government educational institutions,
17 
INCLUDING ALL GOODS PURCHASED AND SERVICES RENDERED TO SAID
18 
EDUCATIONAL INSTlTUnONS BY SUPPLIERS AND SERVICE PROVIDERS
19 
"(I)" XXX
20 
"(J)" XXX
21 
"(K)" XXX
22 
"(L)" XXX
23 
"(M )" XXX
24 
"(N )" XXX
25 
"(0 )" XXX
26 
"(P)" XXX
27 
"(Q )" XXX
28 
"(R)" Sale, importation, printing, or publication of books, SCHOOL PAPER
29 
PRODUCTS and any newspaper, magazine, review or bulletin which appears at
30 
regular intervals with fixed prices or subscription and sale and which is not
31 
devoted principally to the publication of paid advertisement: PROVIDED, THAT


1
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
31
SCHOOL PAPER PRODUCTS SHALL INCLUDE PAPER COMMODITIES CONSUMED 
BY STUDENTS AND TEACHERS DURING THE SCHOOL YEAR"
"(S )" XXX 
"(T)" XXX 
"(U )" X XX 
" (V y 'x x x  
"(W )" XXX 
"(X )" XXX 
"(Y )" XXX
"(Z )" X XX
"(AA)" Sale OR IMPORTATION o f drugs and medicines [prescribed for 
diabetes, high cholesterol, and hypertension beginning January 1, 2019]; [and] 
"(BB) SALE OF ELECTRICITY, INCLUDING SALE OR IMPORTATION OF 
MACHINES AND EQUIPMENT TO BE DIRECTLY USED IN THE GENERATION, 
TRANSMISSION, AND DISTRIBUTION OF ELECTRICrTY; AND
"(CC) [(BB)] Sale or lease of goods or properties of the performance of 
services other than the transactions mentioned in the preceding paragraphs, the 
gross annual sales and/or receipts do not exceed the amount of [Three million 
pesos (P3,000,000)] FIVE MILLION PESOS (5,000,000).
Sec. 3. Sec. 197 of the NIRC, as amended, is hereby further amended to 
read as follows:
"Sec. 197. Stamp Tax on Charter Parties and Similar Instruments 
"(a )" XXX
"(G) Persons Required to Register for Value-Added Tax.- 
" ( l) " x x x
"(a) His gross sales or receipts for the past twelve (12) months, other 
than those that are exempt under Section 109 (A) to (BB), have exceeded [Three 
million pesos (P3,000,000)] FIVE MILLION PESOS (P5,000,000); OR
"(b) There are reasonable grounds to believe that his gross sales or 
receipts for the next twelve (12) months, other than those that are exempt under


2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
1
Section 109 (A) to (BB) will exceed [Three million pesos (P3,000,000)] FIVE 
MILLION PESOS (P5,000,000).
XXX
Sec. 4. Sec. 288 of the NIRC, as amended, is hereby further amended to 
read as follows:
"Sec. 288. Disposition of Incremental Revenues. -
(A) X XX
(B ) x X X
(C ) x X X
(D) [Increm ental] TOTAL Revenues from the Value-Added Tax. [Fifty percent 
(50% ) of the Local Government unit's share from the] TFIE TOTAL 
incremental revenue from the Value-Added Tax shall be allocated and 
used exclusively for the following purposes;
(1) [Fifteen percent (15% )] TEN PERCENT (10% ) for public elementary and 
secondary education to finance the ACQUISITION AND IMPROVEMENT 
OF SITES, construction of buildings, purchases of school furniture and in- 
service teacher trainings;
(2) Ten percent (10% ) for health insurance premiums of enrolled indigents 
as a counterpart contribution [o f the local government] to sustain the 
universal coverage of the National Flealth Insurance Program;
(3) [Fifteen 
percent (15% )] TEN 
PERCENT (10%) for environmental 
conservation to fully implement a comprehensive national reforestation 
program; [and]
(4) Ten percent (10% ) for agricultural modernization to finance the 
construction of farm-to-market roads and irrigation facilities, COMMUNAL 
IRRIGATION 
SYSTEMS; 
POST-HARVEST 
FACILITIES; 
SEED 
AND 
ORGANIC FERTILIZER SUBSIDIES; LIVESTOCK DISPERSAL PROGRAM; 
AND ESTABLISHMENT OF MARICULTURE AND AQUACULTURE PARKS [.];


1 
(5 )TEN PERCENT (10%) FOR FOOD VOUCHERS FOR THE FIRST TO
2 
SEVENTH INCOME DECILES OF THE NATIONAL HOUSEHOLD TARGETING
3 
SYSTEM FOR POVERPi' REDUCTION (NHTS-PR); AND
4 
(6) TEN PERCENT (10%) FOR SOCIAL MITIGATING MEASURES AND
5 
INVESTMENTS IN SOCIAL PROTECTION, EMPLOYMENT, AND HOUSING
6 
THAT PRIORITIZE THE POOR AND NEAR-POOR HOUSEHOLDS, AS
7 
IDENTIFIED UNDER THE NHTS-PR.
8
9 
Sec. 5. Separability Clause. -  If any part or provision of this Act is held
10 
unconstitutional or invalid, the remaining parts or provisions not affected shall
11 
remain in full force and effect.
12 
Sec. 6. Repealing Clause. -  Any law, presidential decree or issuance,
13 
executive order, letter of instruction, administrative order, rule or regulation
14 
contrary to or inconsistent with the provisions of this Act is hereby repealed,
15 
modified, or amended accordingly.
16 
Sec. 7. Effectivity Clause. This Act shall take effect on January 1, 2020
17 
following its complete publication in the Official Gazette or in at least one (1)
18 
newspaper of general circulation.
Approved,