PH cited for improving cigarette tax policy

The Philippines ranked best in the Association of Southeast Asian Nations (Asean) in terms of tobacco taxation and making cigarettes less affordable based on a global study covering the period 2012 to 2018, the Department of Finance (DOF) said Thursday.

In a statement, the DOF said the independent Tobacconomics Cigarette Tax Scorecard published last year showed the Philippines was among those “with the greatest improvement in cigarette tax policy” due to “the simplification of previously complicated tiered cigarette excise tax structures, accompanied by large tax increases.” The study covered 170 countries.

DOF Assistant Secretary Maria Teresa Habitan reported to Finance Secretary Carlos Dominguez III that the Philippines scored an average of 3.75 out of a perfect score of 5 in this scorecard. It was the highest score among Asean members.

“This was mainly due to our cigarette tax reforms, Republic Act (RA) No. 10351 (the first Sin Tax Reform Law in 2012) and RA No. 10963 (the Tax Reform for Acceleration and Inclusion Act or TRAIN Law implemented in 2018), that removed the inherent weaknesses of the excise tax system like the multitiered structure, price classification fees and the lack of automatic indexation,” Habitan explained.

She said the Tobacconomics Scorecard covered changes in cigarette affordability over time, prices, tax structure and share of taxes in retail cigarette prices.

Significant increases

The Philippines scored a perfect 5 in cigarette affordability “owing to the significant tax increases over the 2012 to 2018 period,” Habitan said.

It also scored 5 in cigarette tax structure “because of its unitary tax system with an annual indexation rate for tobacco products,” she added.

However, the Philippines scored a 1 in cigarette prices “because the cost of cigarettes per pack in 2018 was still relatively cheap compared to those in other Asean countries,” she said.

President Duterte signed two more laws that further increased the excise taxes slapped on “sin” products. These generated about P32.1 billion in additional revenues in 2020.

The Bureau of Internal Revenue last Wednesday published Revenue Regulations No. 7-2021 signed by Dominguez and Internal Revenue Commissioner Caesar Dulay, which implemented the excise tax-collection provisions of RA Nos. 11346 and 11467.

Under RA No. 11346 or the Tobacco Tax Law of 2019, cigarette excise rose to P50 per pack effective Jan. 1, 2021 from P45 a pack last year.

For e-cigarettes, RA No. 11467 imposed an excise tax of P27.50 for every pack of heated tobacco products this year from P25 a pack in 2020.

Under RA No. 11467, the excise tax rate on conventional freebase vapor products also rose to P50 per milliliter (ml) from last year’s P45 per ml.

For salt nicotine vapes, the rate increased to P42 per ml this year from P37 per ml last year.

As for distilled spirits, the excise tax climbed to P47 per proof liter, from P42 per proof liter in 2020.

For fermented liquors, the excise tax is now at P37 per liter from last year’s P35 per liter.