The further increase in cigarette taxes next year will have little impact on inflation, Finance Undersecretary Karl Kendrick T. Chua said on Friday (July 26).
Chua told the Inquirer that the Department of Finance (DOF) had estimated that the impact of additional taxes on cigarettes, considered a “sin” product, would be just a 0.1 percent hike on inflation in 2020, the year that the government starts collecting more taxes from traditional cigarettes, electronic cigarettes and their supposed alternative, vape.
The effect on overall rate of increase in prices of basic commodities would be “much lower” than 0.1 percent, according to Chua.
On Thursday (July 25), President Rodrigo Duterte signed into law Republic Act (RA) No. 11346, which increases tax on cigarettes to P45 from currently P35 per pack starting in 2020. The tax would increase further in 2021 to P50 per pack, P55 per pack in 2022 and P60 per pack in 2023, a year after the end of the Duterte administration.
In 2018, the Tax Reform for Acceleration and Inclusion (TRAIN) Act also raised cigarette taxes,/ twice.
Under RA 11346, heated tobacco products or e-cigarettes will be taxed P10 a pack starting Jan. 1, 2020, to be followed by annual increases of 5 percent starting 2021.
Vapes, cartridges, refills, pods or containers of liquid solutions would be taxed P10 per 10 ml or a larger P50 on top of P10 per additional 10 ml for vape products being sold in volumes higher than 50 ml. Vape products’ taxes would also increase 5 percent annually startingin 2021.
Finance Secretary Carlos G. Dominguez III last week said he found taxes on e-cigarettes and vape to be “too low.”
“Target is to make it equivalent to cigarettes,” Dominguez had said, adding that this proposal will be in a new bill to be submitted to the 18th Congress.
Dominguez had wanted vapes, like Juul, to be taxed per 45 ml. A 0.7 ml pod would be taxed P31.50 each which Dominguez said was a “discounted rate.”
“The approved bill only has P10,” he said. For e-cigarettes, Dominguez said, “we proposed P45 per pack similar to regular packs.”
“These rates are based on equivalency of volume of heated pack to regular pack of cigarettes,” said the finance chief in a previous interview.
He had added that the DOF proposal was to limit e-cigarettes or vape flavors to “those that are similar to regular tobacco and regular menthol cigarettes.”
“There is strong evidence suggesting that many other flavors tend to encourage initiation and heavy use among the young,” he said.
The higher taxes on cigarette and tobacco products were expected to generate an additional P15 billion in revenues next year to augment financing for the Universal Health Care program.
The government needed about P258 billion to fully implement the Universal Health Care in 2020, and “sin” taxes were among its major sources of funding./tsb