House bill raising excise taxes on alcohol, heated tobacco and vapor products hurdles final reading

August 21, 2019

The House of Representatives approved on third and final reading House Bill No. 1026, which seeks to amend the Republic Act No. 8424 or the “National Internal Revenue Code of 1997” by raising the excise tax rates on alcohol products as well as heated tobacco and vapor products.

The Committee on Ways and Means, chaired by Albay Rep. Joey Sarte Salceda, was able to pass the bill on its first hearing by invoking Section 48 of the House rules. 

During the period of interpellation in the plenary last week, Salceda, who is also principal author of HB 1026, allayed fears that the substitute bill contains new tobacco taxes.

"So if you are so afraid of the tobacco taxes, there are no new tobacco taxes (in the bill) except for vape which is not a tobacco product. It is essentially a vape, non-combustion…In fact from P10, this will increase to P30 and this will deliver P800 million to the government," he said. 

Under the bill, distilled spirits shall have an excise tax of 22 percent of the retail price, as well as an additional specific tax of P35 per proof liter in 2020, P40 in 2021 and P45 in 2022. The specific tax shall be increased by seven percent every year afterwards.

As for sparkling wines, they shall be levied with 15 percent of the net retail price as excise tax, as well as a specific tax of P696 per liter next year. The specific tax shall also augment by seven percent each year thereafter.

Atill wines and carbonated wines shall have an excise tax of 15 percent of the net retail price with a specific tax of P60 per liter in 2020. It shall eventually be raised by seven percent every year, effective in 2021.

HB 1026 provides for an increase in excise tax for Alcopop, which refers to alcoholic beverages with alcohol content of less than 10 percent alcohol by volume and whose alcohol is from malt or a distillation process.

Alcopops and fermented liquors shall be taxed with P32 per liter in 2020, P34 in 2021 and P36 in 2022.

Additionally, the rates of tax imposed shall be increased by seven percent every year afterwards effective in 2023.

The measure stipulates that heated tobacco products shall be levied with an excise tax rate of P45 per pack next year, with an incremental increase of P5 the following years until 2023.

The tax imposed shall increase by five percent each year after that, starting in 2024.

While for vapor products, salt nicotine shall have an excise tax of P30 per milliliter in 2020, with an incremental increase of P5 thereafter until 2023. It shall be enlarged by five percent every year effective in 2024.

Meanwhile, the excise tax for conventional nicotine shall be augmented to P4.50 per milliliter in 2022, with an incremental increase of P0.50 from 2021 up to 2023. It shall be raised by five percent each year afterwards.

The bill said selling heated tobacco products and vapor products at prices lower than combined excise and value-added tax rates required by the law shall be prohibited.

Violators shall be penalized with a fine of not less than 10 times the amount of excise plus value-added taxes due, but not less than P200,000 nor more than P500,000. They shall also be punished with four up to six years of imprisonment.

As another amendment to the NIRC, there shall be a Joint Congressional Oversight Committee which shall be co-chaired by the respective Chairpersons of the House and Senate Committees on Ways and Means.

The committee shall have six members from each chamber to be designated by the Speaker and the Senate President. DMS