SIN TAX LAW

Case Overview and Summary

Summary of Republic Act No. 10351:

Restructuring the Excise Tax on Alcohol and Tobacco Products

Distilled Spirits (Section 1):
• Imposes ad valorem tax of 15% of net retail price (excluding excise tax and VAT) per proof, effective January 1, 2013.
• Imposes additional specific tax of ₱20 per proof liter, effective January 1, 2013.
• Ad valorem tax increases to 20% and specific tax remains ₱20 per proof liter, effective January 1, 2015.
• Specific tax increases by 4% annually starting January 1, 2016.
• Defines terms like "net retail price", "proof spirits", and "suggested net retail price".
• Penalties for misdeclaration or misrepresentation of data.

Wines (Section 2):
• Imposes excise tax on wines based on net retail price and alcohol content, effective January 1, 2013.
• Tax rates increase by 4% annually starting January 1, 2014.
• Defines "net retail price" and "suggested net retail price".
• Penalties for misdeclaration or misrepresentation of data.

Fermented Liquors (Section 3):
• Imposes excise tax on beer, lager beer, ale, and porter based on net retail price, effective January 1, 2013.
• Tax rates increase annually from 2013 to 2017, and by 4% annually starting January 1, 2018.
• Separate tax rates for fermented liquors brewed and sold at micro-breweries or small establishments.
• Defines "net retail price" and "suggested net retail price".
• Prohibits downward reclassification of existing fermented liquor categories.
• Penalties for misdeclaration or misrepresentation of data.

Tobacco Products (Section 4):
• Imposes excise tax of ₱1.75 per kilogram on tobacco products, effective January 1, 2013.
• Tax rate increases by 4% annually starting January 1, 2014.
• Separate tax rates for tobacco products specially prepared for chewing.
• Penalties for misdeclaration or misrepresentation of data.

Cigars and Cigarettes (Section 5):
• Imposes ad valorem tax of 20% of net retail price and specific tax of ₱5 per cigar, effective January 1, 2013.
• Specific tax on cigars increases by 4% annually starting January 1, 2014.
• Imposes excise tax on cigarettes packed by hand, with rates increasing annually from 2013 to 2017, and by 4% annually starting January 1, 2018.
• Imposes excise tax on cigarettes packed by machine based on net retail price, with rates increasing annually from 2013 to 2017, and by 4% annually starting January 1, 2018.
• Defines "net retail price" and "suggested net retail price".
• Requires 15% of tobacco leaf raw material to be sourced locally.
• Penalties for misdeclaration or misrepresentation of data.

Identification Markings (Section 6):
• Requires unique, secure, and non-removable identification markings on unit packets, packages, and outside packaging of cigarettes and bottles of distilled spirits.
• Requires installation of automated volume-counters by cigarette and alcohol manufacturers.

Payment of Excise Taxes on Imported Articles (Section 7):
• Subjects importation of cigars, cigarettes, distilled spirits, fermented liquors, and wines into the Philippines, including freeports, to applicable taxes and duties.
• Exempts importations made directly by government-owned and operated duty-free shops from duties only.
• Requires confiscated articles to be destroyed using the most environmentally friendly method.

Revenue Allocation (Section 8):
• Allocates 15% of incremental revenue from excise tax on tobacco products under R.A. 8240 to provinces producing burley and native tobacco, for programs promoting economically viable alternatives for tobacco farmers and workers.
• Allocates 80% of remaining incremental revenue from this Act to universal health care, millennium development goals, and health awareness programs.
• Allocates 20% of remaining incremental revenue to medical assistance and health enhancement facilities program nationwide.

Transitory Provision (Section 9):
• Allocates special financial support for displaced workers in the alcohol and tobacco industries, to be included in the appropriations under the Department of Labor and Employment (DOLE) and the Technical Education and Skills Development Authority (TESDA) from Fiscal Years 2014 to 2017.

Annual Report and Congressional Oversight (Sections 10 and 11):
• Requires DBM, DA, DOH, and PhilHealth to submit annual reports on expenditure of earmarked amounts.
• Establishes Congressional Oversight Committee to review implementation and impact of the Act.

Implementing Rules and Regulations (Section 12):
• Requires the Secretary of Finance to promulgate necessary rules and regulations for effective implementation within 180 days of effectivity.

Separability Clause (Section 13) and Repealing Clause (Section 14) are included.

Effectivity (Section 15):
• The Act takes effect upon publication in a newspaper of general circulation.