THE Senate ways and means committee was told Thursday that the version of the e-cigarette tax before it hopes to generate P3.2 billion in the first year of implementation, much higher than the equivalent House bill’s projection of P1.2 billion.
“Just to compare, our proposal is much higher, of course, than the proposal passed by the House as reflected in House Bill No. 1026,” Finance Undersecretary Karl Kendrick T. Chua told the panel.
House Bill 1026, which also provides for higher taxes on alcoholic beverages, received third and final reading approval in that chamber on Aug. 20.
Revenue from the measure will help fill the P62-billion funding gap for Republic Act No. 11223, or the Universal Health Care (UHC) Act, due to roll out in 2020.
The tax law, which will become RA No. 11346 if passed, will gradually increase excise tax on tobacco products to P60 per pack by 2023 from P35 currently. The same law introduced the following rates on vapor products: P10 on 10 milliliter vapor products, P20 on 20 ml, P30 on 30 ml, P40 on 40 ml, P50 on 50 ml and so on.
The Department of Finance (DoF) and the Department of Health (DoH) proposed to instead tax e-cigarettes on par with the tax for traditional tobacco products.
The DoH and DoF proposal, introduced in the chamber as Senator Emmanuel D. Pacquiao’s Senate Bill No. 987, will increase rates to P45 per pack of heated tobacco products and per milliliter of vapor products beginning in 2020. This is to increase by P5 per year until it reaches P60 in 2023; and by 5% every year thereafter.
“There is a graduated rate for vapes as low as P10, if the volume is zero to 10 milliliter (ml) to as high as 50++,” Mr. Chua said.
“What we thought is that we simplify this multi-tier system, which is not a very good principle in taxation.”
The proposal will also impose a 20% excise tax on e-cigarette devices based on the wholesale price or the value of importation.
President Rodrigo R. Duterte in his fourth State of the Nation Address asked the 18th Congress to pass a measure increasing the excise tax on alcohol and vapor products, which form part of package two plus of the tax reform program.
Also among the remaining packages of the comprehensive tax reform program are the proposal to reduce corporate income tax and streamline fiscal incentives, centralize the real property valuation and assessment system and simplify the tax structure for financial investments.
The government has so far passed Republic Act 10963, which slashed personal income tax and increased or added levies on several goods and services; and RA 11213, which offers an estate tax amnesty and amnesty for delinquent accounts. — Charmaine A. Tadalan
