Duterte signs law imposing higher taxes on alcohol, e-cigarettes

FILE: President Rodrigo Roa Duterte at Fort General Gregorio H. del Pilar in Baguio City on March 18, 2018. KARL NORMAN ALONZO/PRESIDENTIAL PHOTO

MANILA — President Rodrigo Duterte has signed into law a measure raising taxes on alcohol beverages and electronic cigarettes, Malacañang announced on Thursday.

“The sin tax law has been approved,” Presidential Spokesperson Salvador Panelo announced in a Palace press briefing.

Malacañang on Thursday released a copy of Republic Act 11467 which Duterte signed on January 22.

In his message to Senate President Vicente Sotto III and House Speaker Alan Peter Cayetano, Duterte commended the lawmakers for passing the new law which amends the National Internal Revenue Code of 1997 to effectively impose heavier levies on alcohol, heated tobacco, and vapor products.

“I am confident that the multi-tiered effect of this law as a cost-effective health measure to reduce smoking and alcohol consumption among Filipinos support the UHC (Universal Health Care) Act,” Duterte said.

“Coupled with its positive impact in improving domestic resource mobilization, this measure will significantly reinforce and advance this administration’s commitment to provide a better quality of life for every Filipino,” he added.

In November 2019, Duterte certified as urgent a measure imposing higher taxes on alcohol products and e-cigarettes to “address the urgent need to generate additional revenue to support the effective implementation of the Universal Health Care Act and to further protect the right to health of the people.”

The Finance department has estimated that the higher taxes on alcohol beverages and e-cigarettes would yield PHP47.9 billion for the UHC program next year, and a total of PHP356.9 billion for the program over the next five years.

Alcohol beverages

The new law raises excise taxes on distilled spirits to PHP42 per proof liter in 2020, PHP47 in 2021, PHP52 in 2022, PHP59 in 2023, and PHP66 per proof liter in 2024.

Excise taxes on distilled spirits will increase by 6 percent every year starting 2025. These are also different from the ad valorem tax imposed on the products which is equivalent to 22 percent of the price of the distilled spirits.

Distilled spirits include whisky, brandy, rum, gin and vodka, and other similar products or mixtures.

Wine products are levied with a PHP50 excise tax per liter this year. The rate of excise tax will increase by 6 percent every year beginning 2021.

For beer products and other fermented liquors, a PHP35 excise tax per liter will be imposed starting this year, PHP37 per liter in 2021, PHP39 per liter in 2022, PHP41 per liter in 2023, and PHP43 per liter in 2024.

Levies for beer products and other fermented liquors will increase by 6 percent every year starting 2025.

RA 11467 exempts tuba, basi, tapuy, and similar fermented liquors from higher excise taxes.

Tobacco products

Meantime, every pack of heated tobacco products with 20 units or more will have an excise tax of PHP25 in 2020, PHP27.50 in 2021, PHP30 in 2022, and PHP32 in 2023.

Excise taxes for salt nicotine products are at PHP37 per milliliter or a fraction thereof this year, PHP42 in 2021, PHP47 in 2022, and PHP52 milliliter or a fraction thereof in 2023.

For “freebase” or “classic” nicotine products, excise tax rate is raised to PHP45 per pack in 2020, PHP50 per pack in 2021, PHP55 per pack in 2022, and PHP60 per pack in 2023.

The excise tax for all vapor products will go up by 5 percent every year in the succeeding years.

Vetoed provision

At the press conference, Panelo said the President vetoed Section 5 of RA 11467.

Section 5 of the new law requires authorities to secure a court order before they can conduct raids against suspected unscrupulous traders of e-cigarettes and alcoholic drinks.

“I am constrained to veto Section 5 of the measure, which amends the second paragraph of Section 152 of the National Internal Revenue Code (NIRC) as this duly curtails the search and seizure powers of the Bureau of Internal Revenue (BIR),” Duterte explained in his letter to Sotto and Cayetano.

Duterte said the phrase “upon order of the court” unnecessarily requires the BIR, in the exercise of its mandate, to secure an order from the court before its officers may be allowed to enter any place where tobacco, heated tobacco, and vapor products are produced or kept.

“Such restriction does not exist with respect to any other taxable article,” Duterte added.

Government agencies and offices involved in the implementation of the UHC are required to submit to the congressional oversight committee a detailed report on the expenditure of the amounts earmarked in RA 11467 on the first week of August every year.

The Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, is tasked to promulgate the necessary rules and regulations for the effective implementation of the new law.