TWO senators have begun introducing new legislative measures aimed at reforming the country's tax system, with proposals focusing on making travel more accessible for Filipinos and empowering local government units (LGUs) through increased funding for development projects.
Cayetano seeks to abolish travel tax
In a press release, Senator Alan Peter Cayetano filed Senate Bill No. 424 on July 10, 2025, proposing the abolition of the travel tax.
The senator argues this move will reduce financial burdens on Filipinos, boost the tourism sector, and strengthen regional ties within the Association of Southeast Asian Nations (Asean).
"All Filipinos, especially senior citizens and persons with disabilities, must be able to travel freely, without any form of hindrance. This is a right guaranteed by the Constitution," Cayetano stated in his bill.
He said the travel tax, established nearly five decades ago under Presidential Decree No. 1183, is now deemed "outdated and no longer aligned with current economic and regional goals".
To foster regional cooperation, the bill also suggests exempting Asean nationals from the travel tax. This aligns with the Philippines' commitment under the Asean Tourism Agreement of 2002, which advocates for phasing out travel levies among member states.
Cayetano cited a local airline study estimating that while the government could potentially lose around P4 billion in revenue from the tax's removal, the economy stands to gain a substantial P299 billion through increased tourism and consumer spending.
"By abolishing the travel tax, we inch closer towards realizing the freedom of movement that our fundamental law envisions for every citizen," he added.
The senator also highlighted a precedent set by Memorandum Order No. 29 (2023), which currently exempts travelers departing from international airports in Mindanao and Palawan bound for the Brunei Darussalam-Indonesia-Malaysia-Philippines-East Asean Growth Area (BIMP-EAGA) from the travel tax until June 30, 2028.
Cayetano emphasized that this measure, building on a previous proposal from former Senate Minority Leader Aquilino Pimentel III, is aimed at directly reducing travel costs for ordinary Filipinos.
"It is high time to give travelers a break and allow for tourism to flourish by removing one of the barriers to travel," he concluded.
Lacson eyes LGU Development Fund from VAT collections
Meanwhile, Senator Ping Lacson has introduced Senate Bill 405 on July 9, 2025, which seeks to allocate a one percent share of total Value-Added Tax (VAT) collections for local government unit (LGU) development projects. This initiative aims to incentivize LGUs to improve their tax collection efficiency.
In a press release his office emailed to SunStar Davao, "The Local Government Development Fund Act of 2025" mandates the creation of a special fund for LGUs that demonstrate consistent achievement of revenue collection targets and significant contributions to national revenue.
"This bill intends to incentivize local government units (LGUs) that consistently achieve their revenue collection targets and substantially contribute to the national coffers," Lacson stated. He said that such incentives are designed to serve as motivation for LGUs to facilitate business operations and reduce barriers for small entrepreneurs, hence, further enhancing tax collection efficiencies."
A staunch advocate for LGUs, Lacson believes that providing LGUs with the necessary resources will help "dismantle the culture of mendicancy and political patronage" and contribute to "the realization of the elusive inclusive growth that the Filipinos all aspire for as a nation."
Under the proposed bill, the Local Government Development Fund (LGDF) will be exclusively available to LGUs that achieve at least a 10 percent increase in their VAT collection performance in the immediately preceding fiscal year. This performance will be certified by the Bureau of Local Government Finance (BLGF) and validated by the Department of Finance (DOF).
To ensure proper utilization, Lacson stressed that the LGDF must be used solely for developmental projects, activities, and programs (PAPs) that align with the LGUs’ approved Comprehensive Development Plans (CDPs).
The LGDF will be sourced from one percent of the total actual VAT collections, determined by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) based on figures from three fiscal years prior. The allocated amount will be included in the General Appropriations Act (GAA) and directly released to LGUs by the Department of Budget and Management (DBM).
Furthermore, Lacson's bill includes provisions for a capacity-building mechanism to equip LGUs with the necessary skills to properly manage LGDFs, aiming to "enhance local governance, improve the delivery of public services, and strengthen accountability."
An initial P100-million funding will also be allocated for a web-based monitoring system for LGDF-funded programs.
Lacson concluded that Senate Bill 405 seeks to institutionalize a "rational and equitable management of resources for LGU development while allowing for a fiscal environment that fosters self-sufficiency and independence." CEA WITH PR