This policy brief evaluates the Philippine value-added tax (VAT) system along three dimensions: revenue adequacy, distributional incidence, and economic efficiency. Despite a statutory rate of 12%, VAT collections remain modest, largely due to substantial base erosion from extensive exemptions. Using household-level data from the 2023 Family Income and Expenditure Survey, the study estimates the magnitude of the revenue foregone as a result of VAT exemptions under the existing structure. The distributional analysis shows that VAT appears mildly progressive when assessed relative to household expenditure, an outcome driven almost entirely by exemptions on raw food, which constitutes a larger share of spending among lower-income households. By contrast, exemptions on private education, private health services, and utilities are poorly targeted and disproportionately benefit higher-income households. From an efficiency perspective, the results indicate that exemptions generate relatively small deadweight losses compared with the revenue foregone, suggesting limited efficiency justification for many existing exemptions. Removing selected, poorly targeted exemptions would therefore yield significant revenues while imposing modest efficiency costs. Overall, the findings support a gradual rationalization of VAT exemptions, aimed at strengthening revenue performance and improving targeting, alongside complementary measures to protect vulnerable households. The fiscal space generated through VAT base broadening may also create a scope for a future reduction in the statutory VAT rate, provided that overall revenue adequacy is preserved.