House substitutes bill on alcohol tax hike to also include e-cigarette tax
MANILA, Philippines – Lawmakers in the plenary debated on the proposed tax increase for alcoholic products on Wednesday night, August 14, which was supposed to be the only scope of House Bill (HB) No. 1026.
But through substitution that caught some lawmakers by surprise, HB No. 1026 was expanded to also include provisions increasing taxes on electronic cigarettes and heated tobacco products.
The bill's expanded version successfully hurdled the 2nd reading after the House conducted viva voce voting or a vote of ayes or nays.
The 2nd reading approval came just a day after the House committee on ways and means unanimously approved the bill's original version on Tuesday, August 13. (READ: DOF urges lawmakers to speed up alcohol excise tax hike)
Ways and means committee chairperson Joey Salceda told Rappler that the expanded version of HB No. 1026 came from the powerful committee on rules, the panel chaired by Majority Leader Martin Romualdez that has jurisdiction over the order of business during House sessions.
"[It was a] bill in substitution by [the] committee on rules," said Salceda.
HB No. 1026 would amend the National Internal Revenue Code of 1997 and Republic Act No. 10351, which restructured the excise taxes on alcohol and tobacco in 2012.
The bill will undergo its 3rd and final reading in the House next week.
How did they pull off the substitution? The substitution on the plenary floor came after the period of debates was terminated. During the period of amendments that followed, House Deputy Majority Leader Juan Pablo Bondoc made a motion to substitute HB No. 1026 with another version of the bill.
"Mr Speaker, earlier copies of House Bill No. 1026 have been distributed to our members. With Section 104 of our rules. I move that we substitute House Bill 1026 for our House bill under consideration, Mr Speaker," said Bondoc.
House Deputy Speaker Dan Fernandez, who was presiding over the session, approved Bondoc's motion after no lawmaker objected.
But Cagayan de Oro City Representative Rufus Rodriguez said the entire section on e-cigarettes that was added is "extraneous."
"This kind of substitution, House Bill 1026, has extraneous, has rider provisions! Because I attended the hearing of the committee on ways and means.... In that particular hearing, it was agreed that the subject of the bill that was approved in that particular ways and means is only on alcohol," said Rodriguez.
This was echoed by Bayan Muna Representative Carlos Zarate, who has long been against any proposal to increase taxes.
"After they sponsored the bill and the interpellations began, they invoked the power of the committee on rules during the period of amendments to make a substitute bill.... In the spirit of being transparent, we should have debated on this. What the public knew was that you would only impose tax on alcohol, then lo and behold, it’s not going to be the only scope," said Zarate in Filipino.
How much would the increase be for alcohol taxes? HB No. 1026 would increase excise taxes for distilled spirits like gin, rum, and vodka. The proposed increases are as follows:
- Starting January 2020, 22% ad valorem tax on the net retail price of the alcohol product (excluding excise and value-added taxes) plus a specific tax of P30 per proof liter.
- In addition to the 22% ad valorem tax, specific tax per proof liter will increase to P40 in 2021 and P45 in 2022.
- From 2023 onwards, on top of the ad valorem tax, the specific tax will be increased by 7%.
- For sparkling wines, the bill proposes an ad valorem tax of 15% of the net retail price (excluding excise and value-added taxes) per liter and a specific tax of P656 per liter. The specific tax will increase by 7% in 2020 onwards.
- For still and carbonated wines, it will be P60 per liter, to be increased by 7% starting 2021.
- The tax on fermented liquors and alcopops will be P32 per liter starting 2020.
How much would the increase be for heated tobacco taxes? These are the proposed increases for heated tobacco products and vapor products:
- Starting 2020, tax on heated tobacco products will be P45 per pack of 20 units or packaging combinations of not more than 20 units.
- Specific tax per 20 units of heated tobacco products will increase to P50 in 2021, P55 in 2022, and P60 in 2023.
- For vapor products with nicotine salt, P30 tax per milliliter starting 2020.
- Specific tax per milliliter of vapor products with nicotine salts will increase to P35 to 2021, P40 to 2022, and P45 to 2023.
- For conventional "freebase" or "classic" nicotine products, P4.50 tax per milliliter starting P2020, P5 in 2021, P5.50 in 2022, and P6 in 2023. The tax will also increase by 5% every year starting 2024.
Where would the government revenues go? A total of 80% of the funds to be generated from the tax increases under HB No. 1026 would go to the universal health care program.
The remaining 20% would be divided for the following programs under the Department of Health (DOH): medical assistance, Health Insurance Facilities Enhancement Program, and "annual requirements" to be determined by the DOH.
Read a full copy of HB No. 1026 below:
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