House approves on 2nd reading new sin taxes

MANILA, Philippines — The House plenary on Wednesday night approved on second reading a bill increasing the excise tax rates on liquor and heated tobacco and vapor products just a day after it was approved by the Committee on Ways and Means.

READ: House panel OKs bill on liquor tax hike

The approval of House Bill No. 1026 was made via a vote of ayes or nays during the 11th plenary session of the House.

During the period of debates and amendments, Bayan Muna Rep. Carlos Zarate and Cagayan de Oro 2nd District Rep. Rufus Rodriguez questioned the insertion of the provisions on heated tobacco and vapor products, which were not part of the bill approved by the ways and means panel on Tuesday.

“Baka magse-set ho ‘ya, ng [dangerous] precedent sa ilang mabibigat na panukalang batas at usapin sa Kongresong ito… Pagkatapos natin ng mahabang talakayan, debatehan, iba pala ‘yung ipapa-approve sa atin,” Zarate pointed out.

[That might set a dangerous precedent for some serious proposed laws and issues in this Congress… After our lengthy deliberation, debates, it turns out it’s another bill that we’re asked to approve.]

Rodriguez, meanwhile, asked: “Why is there a provision on e-cigarettes and vaping when that was not discussed there in the rule 48 approval of the bill that is now the subject of our deliberations?”

Salceda admitted this move was “not healthy” but insisted that the House Committee on Rules could forward to the plenary a substitute bill that might not be the same to the agreed-upon version during the committee deliberations.

The ways and means panel chairman also claimed most of the tobacco provisions were “hugely” discussed in previous hearings during the past Congresses.

“There is wisdom, I guess, in the use of the plenary or what I call the superior powers of the committee on rules to essentially come up with a bill in substitution to the committee report,” he added.

The proposed law, one of the priority tax measures of the Duterte administration, seeks to amend portions of the National Internal Revenue Code. It specifically seeks to impose the following taxes:

I. Alcohol products

1. Distilled spirits

By Jan. 1, 2020: an ad valorem tax (excluding the excise and value-added tax) equivalent to 22 percent of the net retail price per proof, and a specific tax of P35 per proof liter.

By Jan. 1, 2021: an ad valorem tax (excluding the excise and value-added tax) equivalent to 22 percent of the net retail price per proof, and a specific tax of P40 per proof liter

By Jan. 1, 2022: an ad valorem tax (excluding the excise and value-added tax) equivalent to 22 percent of the net retail price per proof, and a specific tax of P45 per proof liter

In addition to the ad valorem tax, the specific tax imposed will be increased by 7 percent every year thereafter.

2. Wines

Sparkling wines/champagnes: By Jan. 1, 2020, an ad valorem tax equivalent to 15 percent of the net retail price per liter and a specific tax of P696 per liter will be imposed. The specific tax imposed will be increased by 7 percent every year thereafter.

Still and carbonated wines regardless of proof: By Jan. 1, 2020, an ad valorem tax equivalent to 15 percent of the net retail price per liter and a specific tax of P60 per liter will be imposed. The specific tax imposed will be increased by 7 percent every year thereafter.

3. Alcopops and fermented liquors

Starting Jan. 1, 2020, all alcopops (with less than 10 percent alcohol content and sourced from malt or distillation process) and fermented liquors will be taxed P32 per liter. The tax will increase by P2 every year until 2022. The tax imposed will increase by 7 percent every year thereafter.

II. Tobacco products

1. Heated tobacco products

A tax of P45 per pack of 20 units or lesser by Jan. 1, 2020. The tax will increase by P5 every year thereafter until 2023. The tax will then be increased by 5 percent every year starting Jan. 1, 2024.

2. Vapor products

Nicotine salt: P35 per milliliter or a fraction by Jan. 1, 2020, to increase by P5 very year until 2023. Tax will increase by 5 percent every year thereafter.

Conventional “freebase” or “classic nicotine”: P4.50 per milliliter or a fraction by Jan. 1, 2020, to increase by P0.50 every year until 2023. Tax will increase by 5 percent every year starting Jan. 1, 2024.

Tobacco heating systems and electronic or mechanical cigarette devices include e-cigars and vapes.

The incremental revenues that will be generated once the bill is enacted into law will fund social services and infrastructure programs of the government, especially the Universal Health Care Law.

Read the proposed law here: House Bill No. 1026

/atm