A MEASURE setting an alternating tax scheme on tobacco products up to 2035 to curb smuggling and illicit tobacco trade has been approved on second reading in the House of Representatives.
In a voice vote, lawmakers approved House Bill (HB) No. 11360, which will amend the National Internal Revenue Code, imposing a 2% tax rate on tobacco products by 2% every even-numbered year, starting 2026, and 4% every odd-numbered year, starting 2027.
“[The increase shall be implemented] until Dec. 31, 2035, provided that after the ten-year period, a review of the tax imposed and its impact on revenue collections, health costs, and prevalence of smoking shall be conducted,” the bill read.
Heated tobacco products would be charged with a P41 tax per pack of 20, with vape and cigarettes being imposed with a P66.15 tax per pack, according to the proposal.
“Excise tax collection is expected to stabilize and recover from successive tax increases by arresting the widening gap between illicit cigarettes and tax-paid cigarettes,” Ilocos Sur Rep. Grace Kristine Singson-Meehan, who sponsored the bill, told lawmakers.
“The consumption of illegal products is expected to decline, and consumers will shift to legitimate tax-paid cigarettes,” she added.
The House is hard-pressed to cut down on illicit tobacco, which is eating government revenues. A tax moratorium was initially proposed before the House tax panel settled on an alternating tax scheme in its bid to discourage cigarette smuggling.
The Bureau of Internal Revenue (BIR) was P52 billion short of its P185-billion tobacco excise tax target last year, collecting only P134 billion in 2024.
The bill will also empower the Finance department and BIR against front-loading of tobacco products.
Moreover, the chamber adopted a change allowing the Philippine president to jack up the tax rates up to 5% “in case the actual National Government deficit of the previous year exceeds the program deficit by an equivalent of 2% of the gross domestic product of the previous year.”
Nueva Ecija Rep. Mikaela Angela B. Suansing, also among the sponsors of the bill, said the measure would net the government P66 billion from 2026 to 2030, citing a projection from the House ways and means committee.
The Finance department did not officially present a revenue impact estimate of the measure.
Marikina Rep. Stella Luz A. Quimbo, however, said it is improbable for the government to net revenues from the measure, citing reduced tax rates and increases.
“We have public health losses and revenue losses [under this bill],” she told lawmakers in Filipino during her interpellation of the bill. — Kenneth Christiane L. Basilio