Sin taxes on e-cigarettes and vapes approved by lawmakers

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sin taxes

The cost of alcohol and electronic cigarettes looks set to rise after the House of Representatives approved a bill to increase “sin taxes”.

Today (Tuesday, August 20) lawmakers were almost unanimous in approving the third and final reading of House Bill (HB) No. 1206.

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The original version of the bill proposed taxes worth up to 60 pesos on alcoholic drinks only.

However, just before the bill was approved on its second reading last week, the House added 40 to 60 peso taxes on “heated tobacco products” — electronic cigarettes and vaping products.

E-cigarette lobby groups such as Vapers PH have opposed the bill. The group’s president Mark Czerwin Erana said: “These proposed heavy sanctions on e-cigarettes and heated tobacco products will result in a public health tragedy. 

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“Heavy taxes on reduced-risk products will only result to smokers sticking it out with conventional cigarettes instead of switching to less harmful nicotine products.” 

Proceeds of the new taxes will be primarily used to fund the universal health care programme.

HB No. 1206 now moves to the Senate, where it will have to pass a further three readings before being submitted to President Duterte for signing.

Sin taxes and alcohol 

The bill would increase taxes for distilled spirits such as gin, rum, and vodka. The proposed increases are as follows:

  • Starting in January 2020: 22 per cent ad valorem tax on the net retail price of the alcohol product (excluding excise and value-added taxes) plus a specific tax of 30 pesos per proof litre.
  • In addition to the 22 per cent ad valorem tax, specific tax per proof litre will increase to 40 pesos in 2021 and 45 pesos in 2022.
  • From 2023 onwards, on top of the ad valorem tax, the specific tax will be increased by seven per cent.
  • For sparkling wines, the bill proposes an ad valorem tax of 15 per cent of the net retail price (excluding excise and value-added taxes) per litre and a specific tax of 656 pesos per litre. The specific tax will increase by seven per cent in 2021 onwards.
  • For still and carbonated wines, it will be 60 pesos per litre, to be increased by seven per cent starting 2021.
  • The tax on fermented liquors and alcopops will be 32 pesos per litre starting 2020, 34 pesos in 2021, and 36 pesos in 2022. From 2023, on top of the ad valorem tax, the specific tax will be increased by seven per cent.

Sin taxes and ‘heated tobacco’ 

The proposed increases for heated tobacco products and vapour products are as follows:

  • Starting 2020, tax on heated tobacco products will be 45 pesos per pack of 20 units or packaging combinations of not more than 20 units.
  • Specific tax per 20 units of heated tobacco products will increase to 50 pesos in 2021, 55 pesos in 2022, and 60 pesos in 2023.
  • For vapour products with nicotine salt, 30 pesos tax per millilitre starting 2020.
  • Specific tax per millilitre of vapour products with nicotine salts will increase to 35 pesos to 2021, 40 pesos to 2022, and 45 pesos to 2023.
  • For conventional “freebase” or “classic” nicotine products, 4.50 pesos tax per millilitre starting 2020, five pesos in 2021, 5.50 pesos in 2022, and six pesos in 2023. The tax will also increase by five per cent per year from 2024.

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