Congress ratifies tax hike bill on alcohol, smoking products

Updated @ 11:34 p.m., Dec. 18, 2019

MANILA, Philippines — Congress ratified on Wednesday the proposed excise tax hike on alcohol, heated tobacco and vapor products before it went on recess for the holidays.

During their respective sessions, the two chambers ratified the bicameral conference committee report on the disagreeing provisions of the House and Senate versions of a bill raising taxes on the said products.

The bicam committee convened Wednesday morning to reconcile the House and Senate version of the bill, which is eyed to help fund the implementation of the Universal Health Care (UHC) Act.

For distilled spirits, the reconciled version of the bill proposed the imposition of an ad valorem tax of 22% on top of the specific tax of P42 per proof liter in 2020, P47 per proof liter in 2021, P52 per proof liter in 2022, P59 per proof liter in 2023, P66 per proof liter in 2024 and an indexation of 6% thereafter.

For fermented products, a specific tax of P35 per liter in the first year (2020) will be imposed, P37 per liter in 2021, P39 per liter in 2022, P41 per liter in 2023, P43 per proof liter in 2024 and an indexation of 6% thereafter.

For both sparkling and still wines, a specific tax of P50 per liter in the first year (2020) will be imposed and an indexation of 6% in the following years.

Heated tobacco products

The reconciled version of the measure, meanwhile, seeks to impose a specific tax of P25 per pack of heated tobacco in 2020, P27.50 in 2021, P30 in 2022, P32.50 in 2023 and an indexation of 5% beginning 2024.

For vapor products, the tax of P37 will be imposed per milliliter of salt nicotine in 2020, P42 in 2021, P47 in 2022, P52 in 2023 and an indexation of 5% thereafter.

Meanwhile, a tax of P45 per 10 milliliter of free base will be imposed in 2020, P50 in 2021, P55 in 2022, P60 in 2023 and an indexation of 5% thereafter.

The bicam’s proposal also prohibits the sale of heated tobacco products (HTPs) and e-cigarettes to non-smokers and those below  21 years old.

“The reason for that is the sellers e-cigs and HTPs all say that they are targeting those who want to switch. Therefore, we made it a policy,” Sen. Pia Cayetano, chair of the Senate ways and means committee, told reporters after the bicam meeting.

“You will only sell these products to smokers so they can switch. Do not attempt to somebody who does not even have a habit of smoking,” she added, speaking partly in Filipino.

According to Albay Rep. Joey Salceda, the bill is expected to give the government P24.9 billion in revenue.

“We made an adjustment because the revenue was only projected at P16 billion under the House version. But in Senator Pia’s version, it reached P47 billion, so more or less it’s in the middle,” he said, speaking partly in Filipino.

However, Cayetano admitted that the P24.9-billion projected revenue would not be enough but Salceda noted that “it’s a good start.”

“Even at what we were proposing at the highest rate, it’s never enough because we’re a developing country. So it’s never enough. But we have to start somewhere, right?” Cayetano said.

Sixty percent of the revenues from the increased excise tax will be earmarked

VAT-exempt

The measure also includes a provision that would exempt from value-added tax (VAT) prescription medicines for high cholesterol, diabetes, and heart diseases.

The VAT exemption would then branch out to medicines for mental health, cancer, kidney diseases and tuberculosis by 2023.

According to Salceda, the fiscal implication to exempt from VAT prescription medicine will have a fiscal implication of up to P6 billion.

/edv / atm