Tobacco sin tax to generate P15.7 billion in additional revenues

MANILA, Philippines — The newly enacted tobacco sin tax law is expected to generate P15.7 billion in additional revenue next year, narrowing down the projected financing gap for the government’s Universal Health Care (UHC) program, the Department of Finance (DOF) said over the weekend.

In a text message, Finance assistant secretary Antonio Lambino said Republic Act 11346, which was signed by President Duterte last Thursday, is projected to raise P15.7 billion in additional revenue in 2020 and P129.9 billion over the next five years.

“(The expected revenue is) P15.7 billion in 2020 and P129.9 billion over the first five years of implementation,” Lambino said.  

According to the DOF, proceeds from the incremental excise taxes would be used to help fund the government’s UHC program, which would require P257 billion in 2020, or P1.44 trillion over the next five years.

However, the amount is still lower than the funding gap for UHC, which was pegged at P62 billion for 2020 alone, and P426 billion until 2024.  

This means the UHC still has a funding gap of P46.3 billion for 2020 or P296.1 billion over the next five years.

To further bridge this gap, Lambino said the DOF is pushing for the passage of additional excise taxes on alcohol and electronic cigarette products.

“Several legislators have already filed versions of the alcohol and e-cigarette tax reform bill. We are hoping to further close the financing gap via this measure,” he said.  

RA 11346 increases the excise tax on cigarettes to P45 per pack starting Jan. 1 next year from the current rate of P35 per pack.

This will be followed by a P5 increase annually until the rate reaches P60 in 2023. Starting 2024, the rate will be increased by five percent every year.

The law also imposes a new tax on electronic cigarettes, including heated tobacco and vaping products. These products will be levied a P10 excise tax for every 10 milliliter of liquid solution or gel starting Jan. 1 next year. The rate will be increased by five percent every year thereafter.

Going forward, the DOF also wants to increase excise taxes on alcohol products to at least P40 per liter, and to raise sin taxes on e-cigarettes to P45, or the same level as that of regular cigarettes.  

“President Duterte’s goal is to implement the UHC program the way it was meant to be implemented: as a first-class law at par with the world’s best healthcare systems. It is meant to provide quality and affordable healthcare for all, especially for poor families,” Finance Secretary Carlos Dominguez said in a statement.  

“We can only accomplish this by raising the taxes on ‘sin’ products. The revenue we will collect from the higher or new taxes on regular tobacco products and their alternatives will help fill the funding gap in the UHC program,” he said.