A new law that will impose an increase in the excise taxes on alcoholic beverages, heated tobacco products (HTPs), and vapor products will help improve health outcomes by reducing consumption of these harmful products, especially among the poor and the youth, according to the Department of Finance (DOF).
Finance Secretary Carlos Dominguez said the law will also provide additional funding that will help the universal health care program succeed.
President Duterte on Wednesday signed Republic Act (RA) No. 11467 into law last January 22, 2020 which included a vetoed provision which requires government authorities to seek a court order first before conducting any raid on alcohol and tobacco facilities.
Dominguez earlier said he recommended to the President to line veto the provision included in the bill.
RA 11467 also exempts certain prescription medicines from value added tax (VAT).
The new sin tax law, which also amends the National Internal Revenue Code (NIRC), seeks to raise the excise taxes on alcohol, heated tobacco, and vapor products to generate funds for the government’s universal health care program and at the same time help protect the public from the ill effects of the sin products.
Duterte said while he welcomed the new law, he was constrained to veto section 5 of the measure as it curtails the search and seizure powers of the Bureau of Internal Revenue (BIR) as well as the power of the State to collect taxes.
He said the provision “renders powerless the BIR to effectively implement enforcement mechanisms against illicit tobacco products.”
The new measure also exempts medicines for diabetes, hypertension, and high cholesterol from VAT along with prescription drugs for cancer, mental illness, tubercolosis and kidney disease by 2023.
The law directs the Department of Health (DOH) to provide a list of medicines that are included in the exemption, as well as the Food and Drug Administration (FDA) to determine and regulate the manufacture, importation, sale, packaging, advertising, and distribution of heated tobacco and other vapor products, including banning the sale to persons below 21 years old.
DOH Secretary Francisco Duque III said he sees the signing of the law as a “win-win” situation for the country as it can make products used as alternative to cigarette smoking less accessible to the public.
“This will give us an enormous strategic advantage in reducing non-communicable diseases and providing the necessary restrictions in the accessibility and availability of harmful products, especially among the youth,” said Duque.
He said the law is also a welcome tool in ensuring adequate funding for the Universal Health Care (UHC) program of the government.
“This will serve as a source of additional revenue for the implementation of the UHC Law,” said Duque.
Sin Tax Coalition co-convener Dr. Anthony Leachon said in calculations show the newly signed sin tax reform will raise approximately P22 billion in incremental revenue for the first year.
Under the measure, for fermented liquors, a specific tax of P35 per liter will be imposed this year, which will subsequently increase by P2 per liter per year until it reaches P43 per liter in 2024. Thereafter, the rate will increase by six percent every year.
Distilled spirits will be taxed with a 22 percent ad valorem tax on top of a specific tax of P42 per proof liter this year, which will increase to P47 per proof liter in 2021, P52 per proof liter in 2022, P59 per proof liter in 2023 and P66 per proof liter in 2024. Thereafter, the rate will increase by six percent every year.
Alcopops will be taxed similar to the rates for distilled spirits.
For wines, both still and sparkling, the specific tax is at P50 per liter this year, and will increase by six percent yearly thereafter.
HTPs will be taxed with new rates of P25 per pack in 2020, P27.50 in 2021, P30 in 2022, P32.50 in 2023, and five percent yearly thereafter.
A tax of P45 per 10 milliliter of conventional freebase vapor products will be imposed in 2020, P50 in 2021, P55 in 2022, P60 in 2023. Thereafter, the rate will increase by five percent every year.
For salt nicotine vapor products, the tax of P37 per millimeter will be imposed on the first year, and additional P5 per ml per year until the rate reaches P52 per ml in 2024.
Thereafter, the tax will be increased by five percent every year.
“The Bureau of Internal Revenue will implement the new law with new rates on alcohol and e-cigarette effective January 1, 2020 as the law clearly says January 1 is when the new rates apply,” Dominguez said. – A. Celis, J. Montemayor and G. Naval
