The House of Representatives on Wednesday approved on second reading the Package 2 of the Comprehensive Tax Reform Program with the inclusion of heated tobacco and vapor products in its coverage.
Through viva voce voting, members of the lower chamber approved the inclusion of the excise taxes on heated tobacco and vapor products in the coverage of the House Bill 1026, which originally covers additional taxes on alcohol products.
On Tuesday, the House Committee on Ways and Means only approved the proposal increasing the excise tax on alcohol products in one day hearing invoking House Rule 10, Section 48.
Albay Rep. Joey Salceda, the panel chairman, said the government is expected to generate P32.94 billion in revenues in the first year of implementation of the measure increasing alcohol taxes, which is part of the the Package 2 Plus B of the Comprehensive Tax Reform Program of the Duterte administration.
The Department of Finance has said revenue from fermented liquor, or beer, is estimated to reach P24.7 billion; distilled spirits, P9.2 billion; and wines, P40 million.
The revenue from additional taxes from alcohol will fund the proposed Universal Health Care Act. The government needs P257 billion for the first year of the implementation of UHC law in 2020.
The bill seeks to increase the excise tax imposed on distilled spirits by ₱6.60, compared to what is implemented under Republic Act 10351 or Excise Tax Reform Law on alcohol and tobacco.
Currently, RA 10351 is imposing distilled spirits a P22.40 specific tax and an ad valorem tax of 20 percent.
Under the bill, starting January 2020, an ad valorem rate of 22 percent including specific tax rates per proof liter of P30, P35, P40, P45 from 2020 to 2023 will be imposed on distilled spirits; and it will be increased by 7 percent annually starting 2024.
The committee also approved a shift to a unitary rate of ₱650 plus ad valorem of 15 percent for sparkling wines, compared to the two-tiered system under RA 10351. It will be increased by 7 percent annually starting 2024.
The bill said cooking wines with salt contents of not less than 1.5 grams for every 100 mililiter will be exempted from excise tax.
Meanwhile, the tax on still and carbonated wines with lower than 14% alcohol content was increased by ₱2.10 (from P37.90 to P40), while those with an alcohol content higher than 14% saw a ₱4.10 increase effective January 2020. It will be increased by 7 percent every year thereafter.
Also, the approved tax rate on fermented liquors was P28, ₱2.60 higher than the P25.40 tax rate mandated by RA 10351. It will be increased by 7 percent every year thereafter.
Tobacco products
Meanwhile, the inclusion of heated tobacco and vapor products will bring in an additional P3.2 billion in the projected revenues.
Under the bill, heated tobacco products or the so-called e-cigarettes, will now be levied P45 per pack of 20 beginning January 1, 2020, P50 in 2021, P55 in 2022 and P60 in 2023 and five percent yearly increase effective Jan. 1, 2024.
For vapor products, individual cartridge, refill, pod or container of its liquid solutions or gel will now be charged P10 per 10 milliliters (ml). If the product being sold is more than 50ml, it will be charged P50 excise tax plus P10 per additional 10ml.
The rates imposed on vapor products shall be increased by five percent every year effective Jan. 1, 2024.
The measure also provides excise taxes on nicotine salt and classic nicotine from P30 to P45 from 2020 to 2023, respectively, and an additional 5 percent after 2024.
The bill also carries stiffer penalties against illicit tobacco trade, with monetary fines.
Proceeds from the taxes, 50 percent of which will be used exclusively for the implementation of UHC and health programs, would be determined by the Department of Health (DOH).
Portions of the revenues collected shall also be allocated and divided among the tobacco-producing provinces and utilized exclusively for programs to promote economically viable alternatives for tobacco farmers and workers.
Image credits: Ilkin Guliyev | Dreamstime.com