Senate approves higher tax on tobacco products

MANILA, Philippines — The Senate last night approved the proposal to increase the excise taxes on tobacco products, a measure President Duterte certified as urgent.

Approved with a vote of 20-0, Senate Bill 2233, which seeks to increase the excise tax on cigarettes by P45 per pack effective Jan. 1, 2020; P50 per pack in January 2021; P55 per pack in January 2022 and P60 per pack effective Jan. 1, 2023.

This will be followed by a five-percent annual tax hike starting Jan. 1, 2024.

The approval came before the 17th Congress finally adjourns this week.

If signed into law, it would be the eighth time tobacco taxes were adjusted since 2012.

Being a certified bill, the Senate approved the measure on second reading and third and final reading with a vote of 20-0. Witnessing the approval were Finance Secretary Carlos Dominguez III, Cabinet Secretary Karlo Nograles and other officials from Malacañang and the Department of Finance.

Applause broke out in the gallery when Senate President Vicente Sotto III banged the gavel signifying the bill’s approval.

Leaders of the House of Representatives sent word to Sotto that it was waiting for the measure to be sent to them last night so it could be adopted and sent to Malacañang for Duterte’s signature.

The House had earlier stated it would simply adopt the Senate version to obviate the need to convene the bicameral conference committee to reconcile conflicting provisions “in the interest of speedy legislation.”

Prior to its approval, several senators made amendments to the bill, including expanding the tax coverage to include heated tobacco products and vapor products.

For heated tobacco products and vapor products, a levy of P10 per 10 milliliters (ml) of liquid nicotine will be imposed, 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.

The inclusion of heated tobacco products and vapor products was not part of the deliberations of the Senate committee on ways and means on the bill.

The bill also mandated the placement of text and graphic warnings on the heated tobacco and vapor products.

Proceeds from the new taxes will go mostly to funding the Universal Health Care (UHC) law, which reportedly needs P257 billion this year.

The government can cover the cost of the UHC program from its current funding sources from the national budget, the Philippine Amusement and Gaming Corp. and the Philippine Charity Sweepstakes Office in the amount of P195 billion.

The new taxes on tobacco products is expected to contribute at least half of the funding gap of P62 billion.

‘Win-win situation’

As the Senate leadership made a final push last night to have the tobacco tax hike measure approved, the World Health Organization (WHO) said the Philippines stands to achieve a “win-win situation” if it succeeds in doubling cigarette prices from the current P30 per pack to P60.

WHO, through Philippine representative Gundo Weiler, said “there is no rational agreement” that can justify keeping the prices of cigarettes low. With higher cigarette prices, “real lives will be saved,” Weiler pointed out.

He said the country posted a “record drop” in smoking rate from almost 30 percent in 2009 to 24 percent in 2015. This represents a one-fifth decrease, the highest in Asia in “such a short period of time.”

“The sin tax, the advertisement ban, the restriction (on public smoking), package labeling – it’s really a battery of measures that has resulted in significant decrease in smoking rates,” he said at the Department of Health (DOH)’s celebration of World No Tobacco Day and No Smoking Month.

The WHO representative maintained some 460,000 lives would be saved annually by raising cigarette prices to P60 per pack as proposed in Congress.

On the other and, around 300,000 lives will be saved if the proposal to increase taxes to P45 per pack would be approved. 

“It’s better than nothing but it’s not the same number. Already, we have a difference of 160,000 lives you are not saving if you are not increasing it to P60,” he said.

The other “win” is for the economy, specifically in terms of funds saved from “unnecessary health care” as a result of lower tobacco-related illnesses due to decreased cigarette consumption.

With higher revenue from higher taxes, he said the government would be able to fund universal health care (UHC), an “important economic benchmark” for the country.

Health Secretary Francisco Duque III, for his part, stressed the sin tax legislation should be considered as a “health measure first and foremost” and not an economic measure.

“Some are looking at sin tax law as a revenue measure. They should not because it is not the number one consideration in our collective desire to increase the taxes,” he said.

The health chief warned that some 250,000 individuals would get into the habit of smoking if the prices of cigarettes are kept steady or low.

He added that more than 117,000 die from tobacco-related illnesses every year while the economic loss from only four related illnesses can be up to a “staggering” P210 billion a year.  

Not promoting e-cigarette

Duque emphasized the DOH is not promoting electronic cigarettes or e-cigarettes as alternative to smoking.

He said a draft administrative order (AO) mandates that all electronic nicotine delivery system (ENDS) products be registered with the Food and Drug Administration (FDA).

“I don’t want to preempt what is in the AO which we hope will be issued or promulgated in the coming days. But it does not necessarily mean... that we are saying that this is a good alternative to smoking,” he said at a press briefing.

“We’ve already seen our own friends, unfortunately even some of our relatives, having these (products). So we better regulate this and let it go through rigid, stringent regulatory standards,” he stressed.

Meanwhile, PhilHealth acting president and chief executive officer Roy Ferrer said the agency is prepared to play its role in the full implementation of UHC.

“Just like any grand undertakings, there would be obstacles along the way, difficulties that we could not predict. But even if we could, we would be incapable of preventing them. Be that as it may, our resilience, wisdom and dedication will guide us past deterrents,” Ferrer said at a forum on UHC hosted by the Philippine Information Agency (PIA) in Pangasinan. –  With Sheila Crisostomo, Eva Visperas