House set to approve higher tobacco tax rates

November 30, 2018

THE House of Representatives is set to approve on final reading the measure that increases excise tax on tobacco products.

House Bill 8618 aims to reduce consumption of tobacco by making it more expensive through higher excise tax.

Proposals to raise the excise taxes on alcohol and tobacco products also seek generate revenue to fund to the Universal Health Care (UHC) program of the government.

House Bill 8618 is authored by Speaker Gloria Macapagal-Arroyo,  Sultan Kudarat Rep. Horacio Suansing, Deputy Speaker Sharon Garin, Manila Rep. Marvin Nieto, Nueva Ecija Rep. Estrellita Suansing, Ako Bicol Reps. Rodel Batocabe and Christopher Co.

Earlier, HB 8677 or the measure that raises excise tax rates on alcohol from the rates imposed by the National Internal Revenue Code (NIRC) was approved in third and final reading.

HB 8618 in particular seeks to address the perceived inequality on the excise tax collections on alcohol products.

Collections from alcohol account for 30 percent while cigarettes cover 70 percent of excise tax collections.

The bill proposes to level this by raising the indexation of excise tax rates on alcohol products from four percent to seven percent for inflation.

Finally, the distinction between fermented liquors brewed in microbreweries and in factories is removed by HB 8618 to facilitate simpler tax administration.

Under the NIRC, as amended by RA 10351, cigarettes per pack has a unitary tax rate of P32.50 from January 2018 to June 2018. This increased to P35 in July 2018, and was slated to remain the same until  December 2019.  It was set to increase further to P37.50 per pack from January 2020 to December 2021, and then to P40 from January 2022 to December 2023.

From January 2024 onwards, the unitary tax rate was supposed to increase four percent each year.

However, under HB 8618, each pack of cigarettes shall be taxed P37.50 beginning July 1, 2019 until June 30, 2020. An amount of P2.50 shall be added to the rate thereafter until it reaches P45.

This means cigarettes per pack will be taxed P40 beginning July 2020; P42.50 beginning July 2021; and P45 beginning July 2022.  On July 2023 and every year onwards, the tax rate shall be raised an additional four percent.