House OKs bill rationalizing tobacco, vape excise taxes

The House of Representatives approved House Bill 11360 on second reading, a measure aimed at rationalizing excise tax rates on tobacco, heated tobacco, and vapor products to address declining revenue collections.

The bill proposes a 2% annual increase in excise tax for cigarettes every even-numbered year starting January 1, 2026, and a 4% increase every odd-numbered year starting January 1, 2027, until December 31, 2035.

This new tax scheme will also apply to heated tobacco and vapor products, differing from the current law's 4% annual increase.

The declining revenue, from P176 billion in 2021 to P135 billion in 2023, has prompted this legislative action, with a projected recovery of P66 billion over five years.

Lawmakers noted that current tax rates are no longer effective in reducing smoking prevalence, which has reportedly increased, with adolescent smoking prevalence doubling from 2.3% in 2021 to 4.8% in 2023.

Illicit trade is also cited as a factor contributing to the revenue decline and increased smoking, and is considered a threat to peace and order as it funds illegal activities.

A review of the tax rates' impact on revenue, health costs, and smoking prevalence will be conducted after 2035, with safeguards against front-loading implemented.