Taxing plastics: The proposed excise tax on single-use plastics

Plastic production around the world continues to increase due to the durability of such material, and its affordability in terms of production cost. The flip side, however, is that most countries struggle to manage the volume of plastic waste that they produce. As a result, a significant portion of plastic waste ends up in bodies of water, clogging waterways and drainage systems, which can be harmful not only to people but also to the marine ecosystem.

The Philippines, known for its tingi culture and vast coastlines, is one of the leading contributors to marine plastic pollution based on a 2015 report by Jambeck, et al. published in the Science Mag. Further, a 2019 study by the Global Alliance for Incinerator Alternatives (GAIA) estimated that Filipinos use about 57 million shopping bags, 45.2 million thin plastics used to pack food and small products (plastic labo), and 164 million sachets per day.

With the purpose of addressing the issue on plastic waste, the government seeks to impose excise tax on single-use plastic (SUP) bags or secondary level plastics made of synthetic or semisynthetic organic polymer, such as “ice,” “labo,” or “sando” bags, with or without handle, used as packaging for goods or products.

House Bill 4102 or the Single-Use Plastic Bags Tax Act, which was approved on Third Reading by the House of Representatives in 2022, proposes an excise tax in the amount of P100 for every kilogram of SUP bags removed from the place of production or released from the custody of the Bureau of Customs. On the other hand, Senate Bill 1844, which was filed in 2023, proposes a lesser excise tax rate in the amount of P20 for every kilogram of SUP bags. The excise tax rate imposed will thereafter be increased by four percent every year through revenue regulations.

The proposed law further provides that the incremental revenues from the said excise tax will be allocated to programs of the Department of Environment and Natural Resources for the implementation of Republic Act 9003 or the Ecological Solid Waste Management Act of 2000 in municipalities.

Aside from addressing plastic pollution, the proposed law aims to contribute to government profits as it is projected to generate about P31.52 billion in estimated revenue according to the Department of Finance.

While plastic waste is a critical environmental issue that needs to be addressed, some groups believe that the proposed law may result in higher packaging cost and ultimately lead to the increased price of commodities. Moreover, some trade associations perceive that the quality of products may be compromised as some manufacturers may resort to substandard SUP products to minimize the packaging cost. As such, if the proposed law is implemented, the additional cost is expected to be passed on to the consumers.

In Indonesia, a similar revenue measure was initially proposed but was withdrawn as it was strongly opposed by industry groups citing the imposition of the financial burden to the consumers as one of their main arguments.

Despite being one of the 28 priority bills for passage by June 2025 according to the Legislative-Executive Development Advisory Council, the proposed excise tax on SUP is still pending with the Senate’s Committee on Ways and Means. As the midterm election approaches, and a new set of representatives and senators will assume their respective positions in the legislature, perhaps there can be opportunity for the lawmakers to further review the proposed measures and its potential effects on manufacturers and consumers. Aside from the proposed revenue measure, alternatives to SUP may be seen as helpful to effectively manage plastic waste in the country. The government may, therefore, consider proposing measures to incentivize these other alternatives as well.

Jelica Perez is a Supervisor from the Tax Group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to tax supervisor Jelica Perez or tax principal Kathleen Saga through [email protected], social media or visit www.home.kpmg/ph.