Higher prices on vaping products, alcohol loom as House gives final OK to excise tax hikes

The House of Representatives on Tuesday approved on third and final reading the measure seeking to increase taxes on alcohol, electronic cigarettes and vaping products, one of the priority legislation of President Rodrigo Duterte in his recent State of the Nation Address (SONA).

With a vote of 184 in the affirmative, two in the negative, and one abstention, the chamber approved House Bill 1026 filed by committee chair Albay Representative Joey Salceda.

This is the first bill that the House approved on final reading this 18th Congress.

A total of P17 billion in revenues is expected to be collected from House Bill 1026 during the first year of its implementation.

This amount, however, is only half of the P33 billion that the Department of Finance proposed to fill the gap for the funding of the Universal Health Care law.

House Bill 1026 originally contained provisions only for alcohol products, but during the deliberation on the plenary, it was amended by substitution which now included provisions for tobacco and vaping products.

The bill primarily seeks to reduce consumption on alcohol and tobacco products while generating revenue for the government to fund the Universal Health Care (UHC) law.

Under the measure, distilled spirits such as brandy, rum, whisky and gin will be imposed a 22% ad valorem tax rate on the the net retail price per proof plus a specific tax of P35 per liter beginning January 1, 2020.

A P5-increase in the specific tax will then be imposed every year thereafter until it reaches P45 per liter in 2022. From 2023 onwards, the specific tax for distilled spirits will climb 7% each year.

The bill also integrates two specific tax rates for sparkling wine into a unitary rate pegged at P696.

This means that a 15-percent ad valorem tax per liter will be imposed on sparkling wines plus P650 specific tax per liter. The specific tax will be raised by 7% the years thereafter beginning 2021.

Moreover, the bill removes the "fortified wines" category and integrates it with still wines and carbonated wines with 14 percent alcohol and up.

This category will be taxed at P60 per liter which will increase 7% in the years thereafter beginning 2021.

Cooking wines with salt content of not less than 1.5 grams for every 100 milliliter will be exempted from excise tax under the bill.

Aside from alcohol products, House Bill 1026 also contains provisions imposing higher taxes on e-cigarettes, nicotine and vaping products.

Heated tobacco products or e-cigarettes, for one, will be taxed at a rate of P45 per pack starting January 1, 2020 and will increase by P5 in the years thereafter until 2023.

Additional excise taxes will likewise be imposed on vaping products such as nicotine salt and conventional "freebase" or classic "nicotines."

Finance Undersecretary Karl Chua said they will push the Senate to impose higher tax rates in order to meet what is needed for the proper implementation of the law.

During his fourth SONA, President Rodrigo Duterte urged Congress to immediately pass the remaining packages of his tax reform programs including those for alcohol and tobacco.

He also called on the legislative branch to urgently approve the second package of the administration's comprehensive tax reform program, or the proposed "Tax Reform for Attracting Better and High-quality Opportunities" law.  —LDF, GMA News