An Act Increasing Excise Tax on Tobacco Products, Heated Tobacco Products and Vapor Products

AN ACT INCREASING THE EXCISE TAX ON TOBACCO PRODUCTS, IMPOSING EXCISE TAX ON HEATED TOBACCO PRODUCTS AND VAPOR PRODUCTS, INCREASING THE PENALTIES FOR VIOLATIONS OF PROVISIONS ON ARTICLES SUBJECT TO EXCISE TAX, AND EARMARKING A PORTION OF THE TOTAL EXCISE TAX COLLECTION FROM SUGAR-SWEETENED BEVERAGES, ALCOHOL, TOBACCO, HEATED TOBACCO AND VAPOR PRODUCTS FOR UNIVERSAL HEALTH CARE, AMENDING FOR THIS PURPOSE SECTIONS 144, 145, 146, 147, 152, 164, 260, 262, 263, 265, 288, AND 289, REPEALING SECTION 288 (B) AND 288 (C), AND CREATING NEW SECTIONS 263-A, 265-B, AND 288-A OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED BY REPUBLIC ACT NO. 10963, AND FOR OTHER PURPOSES

SECTION 1. The title of Chapter IV, Title VI of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"CHAPTER IV — EXCISE TAX ON TOBACCO PRODUCTS, HEATED TOBACCO PRODUCTS, AND VAPOR PRODUCTS"

SECTION 2. Section 144 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"SEC. 144. (A) ...

Summary of the Law:

Excise Tax on Tobacco Products, Heated Tobacco Products, and Vapor Products
- Imposes excise tax on heated tobacco products at P10 per pack of 20 units effective January 1, 2020, with a 5% annual increase starting January 1, 2021. (Section 2)
- Imposes excise tax on vapor products based on volume, ranging from P10 for 0-10ml to P50 plus P10 for every additional 10ml over 50ml, effective January 1, 2020, with a 5% annual increase starting January 1, 2021. (Section 2)
- Defines "heated tobacco products" and "vapor products". (Section 5)

Excise Tax on Cigars and Cigarettes
- Increases excise tax on cigars by 5% annually starting January 1, 2024. (Section 3)
- Increases excise tax on cigarettes packed by hand and machine to P45 per pack effective January 1, 2020, with annual increases until reaching P60 per pack in 2023, and 5% annual increases starting January 1, 2024. (Section 3)
- Prohibits selling tobacco products at a price lower than the combined excise and value-added taxes, with penalties. (Section 3)

Penalties and Offenses
- Increases penalties for unlawful possession or removal of articles subject to excise tax without payment. (Section 10)
- Introduces penalties for selling heated tobacco products and vapor products at a price lower than the combined excise and value-added taxes. (Section 11)
- Increases penalties for offenses relating to tax stamps. (Section 12)
- Introduces penalties for violations by manufacturers, importers, and sellers of cigarette paper and related products. (Section 13)

Disposition of Tax Revenues
- Allocates 50% of excise tax revenue from sugar-sweetened beverages, with 80% for universal health care and 20% for medical assistance and health facilities. (Section 14)
- Allocates 50% of excise tax revenue from alcohol products, with 80% for universal health care and 20% for medical assistance and health facilities. (Section 14)
- Allocates excise tax revenue from tobacco products, with 5% (up to P4 billion) for programs to promote alternatives for tobacco farmers, 50% for universal health care (80%) and medical assistance (20%), and 15% (up to P17 billion) for support to Virginia tobacco-producing provinces. (Sections 14, 16)
- Allocates excise tax revenue from heated tobacco products and vapor products, with 80% for universal health care and 20% for medical assistance and health facilities. (Section 14)

Other Provisions
- Authorizes the Bureau of Internal Revenue to supervise establishments producing articles subject to excise tax and appoint third parties to monitor production and removal processes. (Section 6)
- Requires manufacturers, importers, and sellers of cigarette paper and related products to obtain permits and maintain records. (Section 7)
- Repeals Section 8 of Republic Act No. 8240 and other inconsistent laws. (Section 18)