Philippines: Senate ratifies new sin tax measure on e-cigarettes, liquor

18 December 2019
Katrina Domingo

MANILA – (UPDATE) The Senate ratified on Wednesday a bill that will tax electronic cigarettes and impose higher duties on alcohol to raise P22.2 billion on its first year of implementation.

The Senate passed the measure on its last session day in 2019, hours after a bicameral conference reconciled the two chambers’ versions of the bill.

The approved version, which was closer to the P24.7-billion revenue projection in the Senate draft compared to P16 billion in the House bill, was originally supposed to raise P27.4 billion. But this was reduced by P5.2 billion after some prescription drugs were exempted from value-added tax, based on data from Senator Pia Cayetano’s office.

“As a health advocate, I cannot deny that I am not satisfied… As a revenue measure, I had also hoped na sana mas mataas,” said Cayetano, chairman of the Senate tax-writing committee.

“The figures we have are what they are and they will go a long way because nakadagdag tayo at yun ang importante (we will be able to raise more, that’s what’s important),” she said.

The Department of Finance had hoped higher sin taxes would help close a P59.1-billion funding gap for the implementation of the Universal Health Care Law.

The measure, once ratified by the House, will be submitted for President Rodrigo Duterte’s signature for it to become a law.

Under the approved rates, all bottles of wine will be taxed an additional P50 tax, while the following alcoholic beverages will be taxed as follows:

DISTILLED SPIRITS
2020 – P42 + 22 pct ad valorem tax
2021 – P47 + 22 pct ad valorem tax
2022 – P52 + 22 pct ad valorem tax
2023 – P59 + 22 pct ad valorem tax
2024 – P66 + 22 pct ad valorem tax

FERMENTED LIQUOR
2020 – P35
2021 – P37
2022 – P39
2023 – P41
2024 – P43

Electronic cigarettes will be taxed as follows:

HEATED TOBACCO PRODUCTS
2020 – P25
2021 – P27.50
2022 – P30
2023 – P32.50
5 pct indexation thereafter

SALT NICOTINE
2020 – P37
2021 – P42
2022 – P47
2023 – P52
5 pct indexation thereafter

FREE BASE
2020 – P45
2021 – P50
2022 – P55
2023 – P60
5 pct indexation thereafter

Sixty percent of the fund will be allocated for the government’s Universal Health Care program, 20 percent for the improvement of public health facilities, and 20 percent for projects that would help the country meet its sustainable development goals.

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