Philippines Approves Tobacco Tax Hike and Track-and-Trace System

The Philippines House of Representatives has passed two critical bills aimed at addressing revenue losses and smuggling in the tobacco and vaping industries. House Bill 11360, which seeks to rationalize excise tax rates, and House Bill 11286, which mandates a track-and-trace system for tobacco products, both cleared their final readings with overwhelming support.

House Bill 11360: Structured Tax Hikes on Tobacco and Vape Products

Lawmakers voted 190-4 to approve House Bill 11360, which amends the National Internal Revenue Code to impose incremental tax increases on tobacco and vape products. The bill introduces a structured tax hike schedule:

2% increase every even-numbered year starting January 1, 2026.
4% increase every odd-numbered year from January 1, 2027, until December 31, 2035.

Under the new rates:

Heated tobacco products will be taxed at PHP41 per pack.
Cigarettes and vape products will carry a PHP66.15 levy per pack.

The bill also grants the President authority to raise tax rates by up to 5% if the national government deficit exceeds the target by 2%. Additionally, the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) will establish removal thresholds to prevent stockpiling or frontloading.

Nueva Ecija Rep. Mikaela Suansing, the bill’s sponsor, emphasized its potential to recover PHP66 billion in revenue over five years. She noted that while the 2013 Sin Tax Law initially reduced smoking rates and boosted revenue, collections have declined since 2021:

2021: PHP176 billion
2022: PHP160 billion
2023: PHP135 billion

Concurrently, adult smoking rates rose from 18.5% in 2021 to 23.2% in 2023, driven largely by illicit trade.

House Bill 11286: Track-and-Trace System to Combat Smuggling

House Bill 11286, which mandates a track-and-trace system for tobacco products, passed with 177 votes in favor, 4 against, and no abstentions. The bill aims to strengthen excise tax enforcement by requiring:

Secure digital markers with unique identifiers on all tobacco products.
Registration of tobacco manufacturing equipment within 30 days of acquisition or disposal.

The bill also defines the crime of illicit trade for cigarettes, cigars, heated tobacco, vape, and novel tobacco products, imposing stricter penalties on violators. The BIR, in coordination with the National Telecommunications Commission, will have the authority to remove listings of illicit products from digital platforms. Online platforms will be held accountable for ensuring illegal tobacco products are not sold on their sites.

To oversee these measures, the bill establishes the Inter-Agency Tobacco Illicit Trade Council, chaired by the DOF, to implement strategies aimed at curbing illicit trade in the sector.

Long-Term Review and Health Impact

A comprehensive review of the tax rates and their impact on government revenue, health costs, and smoking prevalence will be conducted after ten years of implementation. This ensures the measures remain aligned with public health goals and economic objectives.

Author
Recent Posts

Matthew Ma

Marketing at Ecigator

With over a decade of experience in the e-cigarette industry, Matthew Ma is a seasoned expert in both the manufacturing and usage aspects of vaping products. His extensive background has provided him with a deep understanding of the intricacies and evolving dynamics of e-cigarettes.