Government seen to generate P126 billion from higher tobacco taxes

MANILA, Philippines — The government is expected to generate at least P126 billion in additional revenues over the next five years following the passage of a bill that seeks to increase tobacco excise taxes, the Department of Finance (DOF) said yesterday.

The final approved bill on tobacco excise taxes, as ratified by Congress, is seen to increase the government’s sin tax revenues by P15 billion in 2020, P22 billion in 2021, P26 billion in 2022, P32 billion in 2023 and P31 billion in 2024, for a total of P126 billion over the five-year period, according to initial data provided by Finance Undersecretary Karl Kendrick Chua.

These figures, however, do not yet include the estimated revenues to be generated from the newly approved taxes on electronic cigarette products, Chua said.

Finance Secretary Carlos Dominguez III said these projected revenues are also lower than what was originally anticipated by the DOF, because the final version of the bill scheduled the excise tax hikes on a staggered basis.

Nevertheless, Dominguez said the bill would still enable the Duterte administration to implement the Universal Health Care (UHC) program by 2020.

The finance chief said Congress’ phased increase is “acceptable” and will secure the necessary funding for the UHC program.

Late last Monday, senators approved on third and final reading Senate Bill No. 2233 on tobacco excise taxes. The House of Representatives adopted the Senate version of the bill to ensure its swift passage.

The bill provides for a unitary excise tax of P45 per pack on tobacco products in 2020. This will be followed annual increases of P5 per pack until the rate will have reached P60 in 2023, and a five-percent annual increase thereafter.

It also expanded the coverage for tobacco excise tax to include heated tobacco products and vapor products. A tax of P10 per 10 milliliters of liquid nicotine, P20 for 20 ml, P30 for 30 ml, P40 for 40 ml, P50 for 50 ml and P50 plus P10 for every additional 10 ml above 50 ml will be imposed on these types of products.

The bill is now ready for President Duterte’s signature.

Dominguez thanked the 17th Congress for passing the bill before it adjourned session.

“I think we made history. I think it is only in this administration that tobacco taxes were raised twice. We’re quite thankful to the Senate and also to the House for putting this bill over the line,” he added.

Prior to this, the excise tax on tobacco products had been increased to a rate of P35 per pack pursuant to the Tax Reform for Acceleration and Inclusion (TRAIN) law.

Dominguez also recognized the Senate’s move to introduce taxes on electronic cigarettes (e-cigarettes), such as vapor and heated tobacco products, which are now becoming increasingly popular among the youth.

Earlier, the DOF had said the UHC program may have a funding gap of P62 billion in the first year of its implementation if Congress does not approve further increases in sin taxes. This was estimated to balloon to P426 billion by 2024.

Higher taxes on e-cigarettes

Following the passage of the bill raising the taxes of tobacco, the Department of Health (DOH) is now looking at higher levies for e-cigarettes in the coming 18th Congress.

In a statement, Health Secretary Francisco Duque III said they would be working to regulate other “sin products” such as alcohol and e-cigarettes.

“Alcohol and cigarettes are very harmful to health. We must remember that the harmful use of these products can also affect a community,” he noted.

Duque cited for instance that second-hand smoke affects non-smokers while excessive use of alcohol can lead to road accidents.

He gave assurance the DOH would continue to work “toward progressive policies that uphold the health and wellbeing of the Filipino people.”

The health chief is expected to sign anytime soon an administrative order requiring the registration of all e-cigarette products or electronic nicotine and non-nicotine delivery system with the Food and Drug Administation.

But this, according to Duque, does not mean that the DOH is promoting the use of e-cigarettes. The agency just deemed it necessary to have control over these devices because of their growing popularity, especially among the youth, he added.

Duque reiterated the DOH’s position  that e-cigarettes “should be treated and regulated no differently than other tobacco products until it is proven that e-cigarettes are absolutely safe for consumption.”

“I am aware of the claims that e-cigarettes contain fewer toxic chemicals and are therefore a good alternative to smoking. There is no scientific proof yet that can say e-cigarettes are completely harmless,” he said.

Duque maintained that for the DOH, there is “absolutely no acceptable level of harm, especially when Filipino lives are put to risk.”

As this developed, the president of a tobacco farmers’ group was dismayed by Congress’ passage of the sin tax bill.

In a Bombo Radyo Dagupan interview, Saturnino Distor, president of the Philippine Tobacco Growers Association Inc. from the tobacco-producing town of San Fabian in Pangasinan, said the group’s members are saddened by its approval “without considering many of our sentiments.”

Distor said unlike boxing Sen. Manny Pacquiao who has time to prepare for his fight, tobacco farmers were not given the chance to present their arguments.

He said they do not understand the government’s plan about its passage that will increase taxes to fund the UHC program because if this continues, they will have decreased tobacco production.

“So, how will they sustain the funds for UHC if there is lower production this coming year?” he asked. 

Distor wonders why the focus of the increase of the so-called sin taxes is only on tobacco while alcohol is untouched. – With Sheila Crisostomo, Eva Visperas