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FOURTEENTH CONGRESS OF THE 
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Second Regular Session 
REPUBLIC OF PHILIPPINES 
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S E N A T E  
Introduced by Senator Lacson 
EXPLANATORY NOTE 
In 2004, the government embarked on a major alcohol and tobacco excise 
tax reform to address the flaws of the previous system, which principally failed to 
generate desired amount of revenues and serve its sumptuary objective as well. 
Non-buoyant revenues due to structural defects such as the non-indexation of 
specific tax rates and non-reclassification of alcohol and tobacco products (more 
popularly known as “sin” products) to reflect. current prices characterized the 
previous system. 
The government does not employ tax policy for revenue generation alone 
but it is likewise being used as a powerful tool to affect the behavior of producers 
and consumers. 
Tax policy is employed to control social costs or regulate 
activities that are likely to cause negative externalities. Smoking, for instance is 
an activity that clearly exhibits harmful effects on both the smokers and non- 
smokers and the excise tax is viewed to be an effective intervention in reducing 
demand for sin products. 
However, the same challenges are still being felt today even with the 
passage of a new excise tax law in 2004 under RA No. 9334. The new and 
current structure continues to have inherent weaknesses that continue to put 
revenues at risk and undermine the role of excise tax as a tool to curb 
consumption of tobacco and alcohol products. 
More specifically the following problems continue to haunt the current 
tobacco and alcohol excise tax system: 
1. Presence of multi-tiered structure requires complex rules on product 
classification and creates too much room for discretion; 
2. Presence of multi-tiered structure is prone to downshifting of consumption 
from high-priced to low-priced brands that has negative consequence both 
in terms of revenues and in discouraging consumption; 
3. Presence of old and new brands distinction has deprived government of 
revenues due to the artificially low tax rates applied to old brands; 
4. Presence of old and new brands distinction makes the structure 
inequitable since products having the same price are taxed differently 
thus, leading to an unhealthy competition in the market; 
5. More importantly, the absence of a provision that allows the specific tax to 
track inflation has rendered the tax ineffective in raising revenues and 
curbing consumption. While RA No. 9334 provides for step increases until 


201 1, the rates do not necessarily catch up with inflation. For instance, 
cumulative inflation from 2005 to 2007 is 17.2%. In 2007, the tax rates for 
cigarettes were increased by only 12% for the low-priced brands and by 
6%. 5% and 4% for the medium-priced, high-priced and premium-priced 
brands, respectively. 
In order for the excise tax to continue its dual role as a deterrent to the 
consumption of these so called "sin" products as well as a source of revenue, 
Department of Finance is again spearheading another excise tax reform. 
This bill is designed to once and for all address the persistent problems in 
the country's taxation of alcohol and tobacco products. The general objective of 
this bill is to make the tax structure simple, effective and efficient. It specifically 
seeks to minimize, if not completely eliminate opportunities for discretion and 
keep the tax neutral so that competition will be based purely on price; it will 
enhance the revenue generation to augment the financial resources of 
government and effective tool in curbing the consumption of alcohol and tobacco. 
This bill maintains the specific form of excise taxation because it is easier 
to administer, it does not provide incentive for manufacturers and importer to 
undervalue their products and it is useful in internalizing the negative externalities 
from drinking and smoking since the damage caused by alcohol and tobacco 
products is dependent more on the quantity consumed than on the price of these 
products. 
This bill also addresses the issue of unfair competition between 
manufacturers of locally-produced and of imported alcohol products. 
This bill seeks to move from the current multi-tiered and complex structure 
and adopt a unitary excise tax system for each category of alcohol (distilled 
spirits, fermented liquors, wine) and tobacco products (tobacco, cigar and 
cigarettes). But as a more pragmatic strategy, it is proposed that a two-step 
increase in the rates for cigarettes to avoid a negative impact on revenues is 
envisioned if a unitary structure will be immediately adopted. 
Under the bill, for cigarettes, a two-rate structure of Php 8.00 and Php 
14.00, per pack, for the initial year of implementation and a uniform rate of Php 
14.00 per pack of cigarette for the second year. 
For fermented liquor, the rates will be unified at Php 21.52 per liter. A 
three-year adjustment period in the tax rates for distilled spirits will be undertaken 
to unify the tax rate at Php 150.00 per proof liter on the third year. 
initial year of Php 16 billion. 
The proposed bill is estimated to generate additional revenues on the 
In view of the foregoing, approval of this bill is earnestly requested. 
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{X~-Z 
FOURTEENTH CONGRESS OF THE 
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~~.~ 
i, , :,i 
REPUBLIC OF THE PHILIPPINES 
1 
Second Regular Session 
1 
S E N A T E  
/ 
f 
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Introduced by Senator Lacson 
AN ACT 
RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO 
PRODUCTS 
Be it enacted by the Senate and the House of Representatives of the Congress 
of the Philippines in session assembled: 
SECTION 1. Section 141 of the National Internal Revenue Code of 1997, 
as amended by Republic Act No. 9334, is hereby further amended to read as 
follows: 
“SEC 141. Distilled Spirits. - On distilled spirits, there shall be 
collected, subject to the provisions of Section 133 of this Code, excise 
taxes IN ACCORDANCE WITH ALCOHOL CONTENT as follows: 
(a) 
45% ALCOHOL BY VOLUME AND LESS 
YEAR 1 -- P30.00 PER PROOF LITER 
YEAR 2 -- P80.00 PER PROOF LITER 
YEAR 3 -- P150.00 PER PROOF LITER 
PROV/D€D, THAT, ON THE FOURTH YEAR 
AND EVERY YEAR THEREAFTER, THE EXCISE 
TAX RATES PRESCRIBED HEREIN SHALL BE 
ADJUSTED TO ITS PRESENT VALUE USING AN 
APPROPRIATE PRICE INDEX FOR ALCOHOLIC 
DRINKS, AS PUBLISHED BY THE NATIONAL 
STATISTICS OFFICE (NSO).” 
(b) 
MORE THAN 45% ALCOHOL BY VOLUME -- 
P150.00 PER PROOF LITER 
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PROVIDED, THAT, ON THE FOURTH YEAR 
AFTER THE EFFECTIVITY OF THIS ACT AND 
EVERY YEAR THEREAFTER, THE EXCISE TAX 
RATES 
PRESCRIBED 
HEREIN 
SHALL 
BE 
ADJUSTED TO ITS PRESENT VALUE USING AN 
APPROPRIATE PRICE INDEX FOR ALCOHOLIC 
DRINKS, AS PUBLISHED BY THE NATIONAL 
STATISTICS OFFICE (NSO).” 
[a) If produced from the sap of nipa, coconut, cassava, camote, or 
buri palm or form the juice, syrup or sugar of the cane, provided such 
materials are produced commercially in the country where they are 
processed into distilled spirits per proof liter, Eleven pesos and sixty-five 
centavos (PI 1.65)] 
[b) If produced from raw materials other than those enumerated in 
the preceding paragraph, the tax shall be in accordance with the net retail 
price per bottle of seven hundred fifty milliliter (750 mi.) volume capacity 
(excluding the excise tax and the value-added tax) as follows”] 
[(I) 
Less than two hundred and fifty pesos (P250.00) - One 
hundred twenty six pesos (P126.00) per proof liter;] 
[(2) Two hundred and fitly pesos (P250.00) up to Six hundred and 
seventy-five pesos (P675.00) - Two hundred fifty-two pesos (P252.00), 
per proof liter; and] 
[(3) More than Six hundred and seventy-five pesos (P675.00) - 
Five hundred four pesos (P504.00), 
per proof liter.] 
(c) 
Medicinal preparations, flavoring extracts, and all other 
preparations, except toilet preparations, of which, excluding 
water, distilled spirits form the chief ingredient, shall be 
subject to the same tax as such chief ingredient. 
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“ This tax shall be proportionally increased for any strength of the 
spirits taxed over proof spirits, and the tax shall attach to this substance as 
soon as it is in existence as such, whether it be subsequently separated 
as pure or impure spirits, or transformed into any other substances either 
in the process of original production or by any subsequent process. 
“’Spirits or distilled spirits’ is the substance known as ethyl 
alcohol, ethanol or spirits of wine, including all dilutions, purifications and 
mixtures thereof, from whatever source, by whatever process produced, 
and shall include whisky, brandy, rum, gin and vodka, and other similar 
products of mixtures. 
‘“Proof Spirits’ is liquor containing one-half (1/2) of its volume of 
alcohol of a specific gravity of seven thousand nine hundred and thirty- 
nine ten thousandths (0.7939) at fiffeen degrees centigrade (15°C). A 
‘proof liter‘ means a liter of proof spirits. 
’ 
[L“Net retail price’, as determined by the Bureau of Internal 
Revenue through a price survey to be conducted by the Bureau of Internal 
Revenue itself, or by the National Statistics Office when deputized for the 
purpose by the Bureau of Internal Revenue, shall mean the price at which 
the distilled spirits is sold on retail in at least ten (IO) major Supermarkets 
in Metro Manila, excluding the amount intended to cover the applicable 
excise tax and the value-added tax. For brands which are marketed 
outside Metro Manila, the ‘net retail price’ shall mean the price at which 
the distilled spirits is sold in at least five (5) major supermarkets in the 
region excluding the amount intended to cover the applicable excise tax 
and the value-added tax.] 
[,, Variants of existing brands and variants of new brands which are 
introduced in the domestic market after the effectively of this Act shall be 
taxed under the proper classification thereof based on their suggested net 
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retail price: Provided, however, that such classification shall not, in any 
case, be lower than the highest classification of any variant of that brand.] 
[,‘ A ‘variant of a brand’ shall refer to a brand on which a modifier 
is prefixed and/or suffixed to the root name of the brand.] 
[,, New brands, as defined in the immediately following paragraph, 
shall initially be classified according to their suggested net retail price. 
Willful understatement of the suggested net retail price by as much as 
fifteen percent (15%) of the actual net retail price shall render the 
manufacturer liable for additional excise tax equivalent to the tax due and 
difference between the understated suggested net retail price and the 
actual net retail price.] 
[. ‘New brand’ shall mean a brand registered after the date of 
effectivity of R.A. No. 8240.1 
[I‘ ‘Suggested net retail price’ shall mean the net retail price at 
which new brands, as defined above, of locally manufactured or imported 
distilled spirits are intended by the manufacturer or importer to be sold on 
retail in major supermarkets or retail outlets in Metro Manila for those 
marketed nationwide, and in other regions, for those with regional 
markets. At the end of three (3) months from the product launch, the 
Bureau of Internal Revenue shall validate the suggested net retail price as 
defined herein and determine the correct tax bracket to which a particular 
new brand of distilled spirits, as defined above, shall be classified. After 
the end of eighteen (18) months from such validation, the Bureau of 
Internal Revenue shall revalidate the initially validated net retail price 
against the net retail price of the time of revalidation in order to finally 
determine the correct tax bracket which a particular new brand of distilled 
spirits shall be classified: Provided, however, That brands of distilled 
spirits introduced in the domestic market between January 1, 1997 and 
December 31. 2003 shall remain in the classification under which the 
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Bureau of Internal Revenue has determined them to belong as of 
December 31, 2003. Such classification of new brands and brands 
introduced between January 1, 1997 and December 31,2003 shall not be 
revised except by an act of Congress.] 
[,, The rates of tax imposed under this Section shall be increase by 
eight percent (8%) every two years starting on January 1,2007.1 
[,, Any downward reclassification of present categories, for tax 
purposes, of existing brands of distilled spirits duly registered at the time 
of effectivity of this Act which will reduce the tax imposed herein, or the 
payment thereof, shall be prohibited.] 
[ The classification of each brand of distilled spirits based on the 
average net retail price as of October 1, 1996, as set forth in Annex ‘A’, 
including the classification of brands for the same products which, 
although not set forth in said Annex ‘A’, were registered and were being 
commercially produced and marketed on or after October 1, 1996, and 
which continue to be commercially produced and marketed after the 
effectivity of this Act, shall remain in force until revised by Congress.] 
“Manufacturers and importers of distilled spirits shall, within thirty 
(30) days from the effectivity of this Act, and within the first five (5) days of 
every third month thereafter, submit to the Commissioner a sworn 
statement of the volume of sales for each particular brand of distilled of 
, 
spirits sold at his establishment for the three-month period immediately 
preceding. 
“Any manufacturer or importer who, in violation of this Section, 
knowingly misdeclares or misrepresents in his or its sworn statement 
herein required any pertinent data or information shall, upon final findings 
by the Commissioner that the violation was committed, be penalized by a 
summary cancellation or withdrawal of his or its permit to engage in 
business as manufacturer or importer of distilled spirits. 
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“Any corporation, association or partnership liable for any of the 
acts or omissions in violation of this Section shall be fined treble the 
amount of deficiency taxes, surcharges and interest which may be 
assessed pursuant to this Section. 
“Any person liable for any of the Acts or omission prohibited under 
this Section shall be criminally liable and penalized under Section 254 of 
this Code. Any person who willfully aids or abets in the commission of any 
such act or omission shall be criminally liable in the same manner as the 
principal. 
“If the offender is not a citizen of the Philippines, he shall be 
deported immediately after serving the sentence, without further 
proceedings for deportation.” 
SEC. 2. Section 142 of the National Internal Revenue Code of (1997), as 
amended by Republic Act No. 9334, is hereby further amended to read as 
follows: 
“SEC. 142. Wines. - On wines, there shall be collected per liter of 
volume capacity, the following taxes: 
“(a) Sparkling wineskhampagnes regardless of proof [, if the net 
retail price per bottle (excluding the excise tax and the value-added tax) 
is:] -THREE HUNDRED PESOS (P300.00); 
[ ( I )  Five hundred pesos (P500.00) or less - One hundred forty-five 
pesos and sixty centavos (P145.60); and] 
[(2) More than Five hundred pesos (P500.00) - Four hundred 
thirty-six pesos and eighty centavos (P436.80)] 
[“(b) Still wines containing fourteen percent (14%) of alcohol by 
volume or less, Seventeen pesos and forty-seven centavos (P17.47)]; and 
”(c) Still Wines containing more than fourteen percent (14%) but not 
more than twenty-five percent (25%) of ‘alcohol by volume, [Thirty-four 
pesos and ninety-four centavos (P34.94).] 
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“(b) STILL WINES, REGARDLESS OF PROOF - FIFTY PESOS 
PROVIDED, THAT, A YEAR AFTER THE EFFECTIVITY 
OF THIS ACT AND EVERY YEAR THEREAFTER, THE EXCISE TAX 
RATES PRESCRIBED HEREIN SHALL BE ADJUSTED TO ITS 
PRESENT VALUE USING AN APPROPRIATE PRICE INDEX FOR 
ALCOHOLIC 
DRINKS, 
AS 
PUBLISHED 
BY 
THE 
NATIONAL 
STATISTICS OFFICE (NSO).” 
“Fortified wines containing more than twenty-five percent (25%) of 
alcohol by volume shall be taxed as distilled spirits. ‘Fortified wines’ shall 
mean natural wines to which distilled spirits are added to increase their 
alcohol strength. 
[Net retail price’, as determined by the Bureau of Internal Revenue 
through a price survey to be conducted by the Bureau of Internal Revenue 
itself, or the National Statistics Office when deputized for the purpose by 
the Bureau of Internal Revenue, shall mean the price at which wine is sold 
on retail in at least ten (IO) major supermarkets in Metro Manila, excluding 
the amount intended to cover the applicable excise tax and the value- 
added tax. For brands which are marketed outside Metro Manila, the ‘net 
retail price’ shall mean the price at which the wine spirits is sold in at least 
five (5) major supermarkets in the region excluding the amount intended to 
cover the applicable excise tax and the value-added tax.] 
[Variants of existing brands and variants of new brands which are 
introduced in the domestic market after the effectivity of this Act shall be 
taxed under the proper classification thereof based on their suggested net 
retail price: Provided, however, That such classification shall not, in any 
case, be lower than the highest classification of any variant of that brand.] 
[A ‘variant of a brand’ shall refer to a brand on which a modifier is 
prefixed and/or suffixed to the root name of the brand.] 
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[New brands, as defined in the immediately following paragraph, 
shall initially be classified according to their suggested retail price."] 
[" 'New brand' shall mean a brand registered after the date of 
effectivity of R.A. No. 8240."] 
[" 'Suggested net retail price' shall mean the net retail price at 
which new brands, as defined above, of locally manufactured or imported 
wines are intended by the manufacture or importer to be sold on retail in 
major supermarkets or retail outlets in Metro Manila for those marketed 
nationwide, and in other regions, for those with regional markets. At the 
end of three (3) months from the product launch, the Bureau of Internal 
Revenue shall validate the suggested retail price of the new brand against 
the net retail price as defined herein and determine the correct tax bracket 
under which a particular new brand of wine, as defined above, shall be 
classified. After the end of eighteen (18) months from such validation, the 
Bureau of Internal Revenue shall validate the initially validated net retail 
price against the net retail price as of the time of revalidation in order to 
finally determine the correct tax bracket which a particular new brand of 
wines shall be classified: Provided, however, That brands of wines 
introduced in the domestic market between January 1, 1997 and 
December 31, 2003 shall remain in the classification under which-the 
Bureau of Internal Revenue has determined them to belong as of 
December 31, 2003. Such classification of new brands and brands 
introduced between January I, 
1997 and December 31, 2003 shall not be 
revised except by any act of Congress.] 
[The rates of tax imposed under this Section shall be increased by 
eight percent (8%) every two years starting on January 1, 2007 until 
January 1,201 1 .] 
[Any downward reclassification of present categories, for tax 
purposes, of existing brands of wines duly registered at the time of the 
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effectivity of this Act which will reduce the tax imposed herein, or the 
payment hereof, shall be prohibited.] 
[The classification of each brand of wines based on the average net 
retail price as of October 1, 1996, as set forth in Annex ‘E’, 
including the 
classification of brands for the same products which, although not set forth 
in said “Annex 6” were registered and were being commercially 
produced and marketed after the effectivity of this Act, shall remain in 
force until revised by Congress.] 
“Manufacturers and importers of wines shall, within thirty (30) days 
from the effectivity of this Act, and within the first five (5) days of every 
month thereafter, submit to the Commissioner a sworn statement of the 
volume of sales for each particular brand of wines sold at his 
establishment for the three month period immediately preceding. 
“Any manufacturer or importer who, in violation of this Section, 
knowingly misdeclares or misrepresents in his or its sworn statement 
herein required any pertinent data or information shall, upon discovery, be 
penalized by a summary cancellation or withdrawal of his or its permit to 
engage in business as manufacturer or importer of wines. 
“Any corporation, association or partnership liable for any of the 
acts or omissions in violation of this Section shall be fined treble the 
amount of deficiency taxes, surcharges and interest which may be 
assessed pursuant to this Section. 
“Any person liable for any of the acts or omissions prohibited under 
this Section shall be criminally liable and penalize under Section 254 of 
this Code. Any person who willfully aids or abets in the commission of any 
such act or omission shall be criminally liable in the same manner as the 
principal. 
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“If the offender is not a citizen of the Philippines, he shall be 
deported immediately after serving the sentence, without further 
proceedings for deportation.” 
SEC. 3. Section 143 of the National Internal Revenue Code of (1997), as 
amended by Republic Act No. 9334, is hereby further amended to read as 
follows: 
“SEC. 143. Fermented Liquor. - There shall be levied, assessed and 
collected an excise tax on beer, lager beer, ale, porter and other fermented 
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liquors except fuba, basi, fapuy and similar fermented liquors [in accordance with 
the following schedule:] AN EXCISE TAX EQUIVALENT TO TWENTY-ONE 
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PESOS AND FIFTY-TWO CENTAVOS (P21.52) PER LITER: 
PROVIDED, 
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THAT, A YEAR AFTER THE EFFECTIVITY OF THIS ACT AND EVERY YEAR 
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THEREAFTER, THE EXCISE TAX RATE PRESCRIBED HEREIN SHALL BE 
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ADJUSTED TO ITS PRESENT VALUE USING AN APPROPRIATE PRICE 
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INDEX FOR ALCOHOLIC DRINKS, AS PUBLISHED BY THE NATIONAL 
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STATISTICS OFFICE (NSO).” 
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centavos (P8.27) per liter;] 
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[“(b) If the net retail price (excluding the excise tax and value- 
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added tax) per liter of volume capacity is Fourteen pesos and fifty 
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centavos (P14.50) up to Twenty-two pesos (P22.00), the tax shall be 
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Twelve pesos and thirty centavos (P12.30) per liter;] 
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[“(c ) If the net retail price (excluding the excise tax and the value- 
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added tax) per liter of volume capacity is more than Twenty-two pesos 
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(P22.00), the tax shall be Sixteen pesos and thirty-three centavos 
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(P16.33) per liter.] 
[“(a) If the net retail price (excluding the excise tax and the value- 
added tax) per liter of volume capacity is less than Fourteen pesos and 
fifty centavos (P14.50), the tax shall be Eight pesos and twenty-seven 
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[“Variants of existing brands and variants of new brands which are 
introduced in the domestic market after the effectivity of this Act shall be 
taxed under the proper classification thereof based on their suggested net 
retail price: Provided, however, That such classification shall not, in any 
case, be lower than the highest classification of any variant of that brand.] 
[,‘A ‘variant of a brand’ shall refer to a brand on which a modifier 
is prefixed andlor suffixed to the root name of the brand.] 
[Fermented liquors which are brewed and sold at microbreweries 
or small establishments such as pubs and restaurants shall be subject to 
the rate in paragraph (c) hereof.] 
[New brands, as defined in the immediately following paragraph, 
shall initially be classified according to their suggested net retail price.] 
[“‘New brand’ shall mean a brand registered after the date of 
effectivity of R.A. No. 8240.1 
[“‘Suggested net retail price’ shall mean the net retail price at 
which new brands, as defined above, of locally manufactured or imported 
fermented liquor are intended by the manufacturer or importer to be sold 
on retail in major supermarkets or retail outlets in Metro Manila for those 
marketed nationwide, and in other regions, for those with regional 
markets. At the end of three (3) months from the product launch, the 
Bureau of Internal Revenue shall validate the suggested net retail price of 
the new brand against the net retail price as defined herein and determine 
the correct tax bracket to which a particular new brand of fermented liquor, 
as defined above, shall be classified. After the end of the eighteen (18) 
months from such validation, the Bureau of Internal Revenue shall 
revalidate the initially validated net retail price against the net retail price 
as of the time of revalidation in order to finally determine the correct tax 
bracket which a particular new brand of fermented liquors shall be 
classified: Provided, however, That brands of fermented liquors introduced 
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in the domestic market between January 1, 1997 and December 31, 2003 
shall remain in the classification under which the Bureau of Internal 
Revenue has determined them to belong as of December 31, 2003. Such 
classification of new brands and brands introduced between January 1, 
1997 and December 31, 2003 shall not be revised except by an act of 
Congress.] 
[“’Net retail price’, as determined by the Bureau of Internal 
Revenue through a price survey to be conducted by the Bureau of 
Internal Revenue itself, or the National Statistics Office when deputized for 
the purpose of Bureau of Internal Revenue, shall mean the price at which 
the fermented liquor is sold on retail in at least twenty (20) major 
supermarkets in Metro Manila(for brands of fermented liquor marketed 
nationally), excluding the amount intended to cover the applicable excise 
tax and the value-added tax. For brands which are marketed outside 
Metro Manila, the ‘net retail price’ shall mean the price at which the 
fermented liquor is sold in at least five (5) major supermarkets in the 
region excluding the amount intended to .cover the applicable excise tax 
and the value-added tax.] 
[“The classification of each brand of fermented liquor based on its 
average net retail price as of October 1, 1996, as set forth in Annex ‘C’, 
including the classification of brands for the same products which, 
although not set forth in said Annex IC’, 
were registered and were being 
commercially produced and marketed on or after October 1, 1996, and 
which continue to be commercially produced and marketed after the 
effectivity of this Act, shall remain in force until revised by Congress.] 
[“The rates of tax imposed under this Section shall be increased by 
eight percent (8%) every two years starting on January 1, 2007 until 
January 1,201 1 .I 
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["Any downward reclassification of present categories, for tax 
purposes, of existing brands of fermented liquor duly registered at the time 
of the effectivity of this Act which will reduce the tax imposed herein, or the 
payment thereof, shall be prohibited.] 
"Every brewer or importer of fermented liquor shall, within thirty 
(30) days from the effectivity of this Act, and within the first five (5) days of 
every month thereafter, submit to the Commissioner a sworn statement of 
the volume of sales for each particular brand of fermented liquor sold at 
his establishment for the three-month period immediately preceding. 
"Any brewer or importer who, in violation of this Section, knowingly 
misdeclares or misrepresents in his or its sworn statement herein required 
any pertinent data or information shall be penalized by a summary 
cancellation or withdrawal of his or its permit to engage in business as 
brewer or importer of fermented liquor. 
"Any corporation, association or partnership liable for any the acts 
or omissions in violation of this Section shall be fined treble the amount of 
deficiency taxes, surcharges and interest which may be assessed 
pursuant to this Section. 
"Any person, liable for any of the acts or omissions prohibited 
under this Section shall be criminally liable and penalized under Section 
254 of this Code. Any person who willfully aids or abets in the commission 
of any such act or omission shall be criminally liable in the same manner 
as the principal. 
"If the offender is not a citizen of the Philippines, he shall be 
deported immediately after serving the sentence, without further 
proceedings for deportation." 
Sec. 4. Section 144 of the National Internal Revenue Code of (1997), as 
amended by Republic Act No. 9334, is hereby further amended to read as 
follows: 
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“SEC. 144. Tobacco Products. -There shall be collected a tax of 
[One peso (Pl.OO)] TWO PESOS AND FIFTY CENTAVOS (P2.50) on 
each kilogram of the following products of tobacco: 
a) 
Tobacco twisted by hand or reduced into a condition to be 
consumed in any manner other than the ordinary mode of drying and 
curing; 
b) 
Tobacco prepared or partially prepared with or without the 
use of any machine or instruments or without being pressed or sweetened 
except as otherwise provided hereunder; and 
c) 
Fine-cut shorts and refuse, scraps clippings, cuttings, stems 
and sweepings of tobacco except as otherwise provided hereunder. 
“Stemmed leaf tobacco, tobacco prepared or partially prepared with 
or without the use of any machine or instrument or without being pressed 
or sweetened, fine-cut shorts and refuse, scraps, clippings, cuttings, 
stems, midribs; and sweepings of tobacco resulting from the handling or 
stripping of whole leaf tobacco shall be transferred, disposed of, or to be 
used in the manufacture of cigars, cigarettes, or other tobacco products on 
which the excise tax will eventually be paid on the finished product, under 
such conditions as may be prescribed in the rules and regulations, 
promulgated by the Secretary of Finance, upon recommendation of the 
Commissioner. 
“On tobacco specially prepared for chewing so as to be unsuitable 
for use in any other manner, on each kilogram, [Seventy-nine centavos 
(PO.79)] ONE PESO AND EIGHTY-SEVEN CENTAVOS (PI .87). 
[The rates of tax imposed under this Section shall be increased by 
six percent (6%) every two years starting on January 1,2007 until January 
1,2011.] 
“PROVIDED, THAT, A YEAR AFTER THE EFFECTIVITY OF 
THIS ACT AND EVERY YEAR THEREAFTER, THE EXCISE TAX 
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RATES PRESCRIBED HEREIN SHALL BE ADJUSTED ANNUALLY TO 
ITS PRESENT VALUE USING AN APPROPRIATE PRICE INDEX FOR 
TOBACCO PRODUCTS, AS 
PUBLISHED BY THE NATIONAL 
STATISTICS OFFICE (NSO).” 
“Manufacturers and importers of tobacco products shall, within 
thirty (30) days from the effectivity of this Act, and within the first five (5) 
days of every month thereafter, submit to the Commissioner a sworn 
statement of the volume of sales for each particular brand of tobacco 
products sold at their establishment for the three-month period 
immediately preceding. 
“Any manufacturer or importer who, in violation of this Section, 
knowingly misdeclares and misrepresents in his or its sworn statement 
herein required any pertinent data or information, shall upon discovery, be 
penalized by a summary cancellation or withdrawal of his or its permit to 
engage in business as manufacturer or importer of cigars or cigarettes. 
“Any corporation, association or partnership liable for any of the 
acts or omissions in violation of this Section shall be fined treble the 
amount of deficiency taxes, surcharges and interest which may be 
assessed pursuant to this Section. 
“Any person liable for any of the acts or omission prohibited under 
this Section shall be criminally liable and penalized under Section 254 of 
this Code. Any person who willfully aids or abets in the commission of any 
such act or omission shall be criminally liable in the same manner as the 
principal. 
”If the offender is not a citizen of the Philippines, he shall be 
deported immediately after serving the sentence, without further 
proceedings for deportation.” 
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Sec. 5. Section 145 of the National Internal Revenue Code of (1997), as 
amended by Republic Act No. 9334, is hereby further amended to read as 
follows: 
“SEC. 145. Cigars and Cigarettes. 
“A) Cigars. - There shall be levied, assessed and collected on 
cigars [an ad valorem tax based on the retail price] A TAX OF 200 
per cigar. [ (excluding the excise tax and the value-added tax) in 
accordance with the following schedule: 
“1) If the net retail price per cigar is Five hundred pesos, 
(P500.00) or less , ten percent (10%); and 
“2) If the net retail price per cigar (excluding the excise tax 
and the value-added tax) is more than Five hundred pesos 
(P500.00), Fifty pesos (P50.00) plus fifteen percent (15%) of 
the net retail price in excess of Five hundred pesos 
(P500.00).] 
PROVIDED, THAT, A YEAR AFTER THE EFFECTIVITY 
OF THIS ACT AND EVERY YEAR THEREAFTER, THE EXCISE 
TAX RATES PRESCRIBED HEREIN SHALL BE ADJUSTED TO 
ITS PRESENT VALUE USING AN APPROPRIATE PRICE INDEX 
FOR TOBACCO PRODUCTS, AS PUBLISHED BY THE 
NATIONAL STATISTICS OFFICE (NSO).” 
“6) Cigarettes Packed by Hand. - There shall be levied, 
assessed and collected on cigarettes packed by the hand a tax at 
the [rates prescribed below:] RATE OF TWO PESOS AND 
FORTY-SEVEN CENTAVOS (P2.47) PER PACK. 
PROVIDED, THAT, A YEAR AFTER THE EFFECTIVITY 
OF THIS ACT AND EVERY YEAR THEREAFTER, THE EXCISE 
TAX RATES PRESCRIBED HEREIN SHALL BE ADJUSTED TO 
ITS PRESENT VALUE USING AN APPROPRIATE PRICE INDEX 
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FOR TOBACCO PRODUCTS, AS PUBLISHED BY THE 
NATIONAL STATISTICS OFFICE (NSO).” 
[“Effective on January 1,2005, Two pesos (P2.00) per pack; 
“Effective on January 1, 2007, Two pesos and twenty-three 
centavos (P2.23) per pack; 
“Effective on January 1,2009, Two pesos and forty-seven centavos 
(P2.47) per pack; and 
“Effective on January 1, 2011, Two pesos and seventy-two 
centavos (P2.72) per pack.] 
“Duly registered or existing brands of cigarettes or new brands 
thereof packed by hand shall be packed in thirties.” 
“(C) 
Cigarettes Packed by Machine. - There shall be levied, 
assessed and collected on cigarettes packed by machine a tax at the 
rates prescribed below: 
“EFFECTIVE ON JANUARY 1,2009 - 
“(1) IF THE NET RETAIL PRICE (EXCLUDING THE EXCISE TAX 
AND THE VALUE-ADDED TAX) IS SIX PESOS AND FIFTY CENTAVOS 
(P6.50) AND BELOW PER PACK, THE TAX SHALL BE EIGHT PESOS 
(P8.00) PER PACK; 
“(2) IF THE NET RETAIL PRICE (EXCLUDING THE EXCISE TAX 
AND THE VALUE-ADDED TAX) IS MORE THAN SIX PESOS AND 
FIFTY CENTAVOS (P6.50) PER PACK, THE TAX SHALL BE 
FOURTEEN PESOS (P14.00) PER PACK; 
“EFFECTIVE ON JANUARY 1, 2010, THE TAX SHALL BE 
FOURTEEN PESOS (P14.00) PER PACK. 
“PROVIDED, THAT, THEREAFTER, THE EXCISE TAX RATES 
PRESCRIBED HEREIN SHALL BE ADJUSTED ANNUALLY TO ITS 
PRESENT VALUE USING AN APPROPRIATE PRICE INDEX FOR 
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TOBACCO PRODUCTS, AS 
PUBLISHED BY THE NATIONAL 
STATISTICS OFFICE (NSO).” 
“ALL BRANDS OF CIGARETTES EXISTING IN THE MARKET 
AT THE TIME OF THE EFFECTIVITY OF THIS ACT SHALL BE 
CLASSIFIED ACCORDINGLY FOR THE PROPER DETERMINATION 
OF THE TAX LIABILITY IN ACCORDANCE WITH THE SCHEDULE 
PROVIDED ABOVE FOR THE YEAR COMMENCING JANUARY 1, 
2009.” 
[“(I) 
If the net retail price (excluding the excise tax and the value- 
added tax) is below Five pesos (P5.00) per pack, the tax shall be: 
“Effective on January 1,2005, Two pesos (P2.00) per pack; 
“Effective on January 1, 2007, Two pesos and twenty-three 
centavos (P2.23) per pack; 
“Effective on January 1,2009, Two pesos and forty-seven centavos 
(P2.47) per pack; and 
“Effective on January 1, 2011, Two pesos and seventy-two 
centavos (P2.72) per pack; and 
“(2) If the net retail price (excluding the excise tax and the value- 
added tax) is Five pesos (P5.00) but does not exceed Six pesos and fifty 
centavos (P6.50) per pack, the tax shall be: 
“Effective on January 1, 2005, Six pesos and thirty-five centavos 
(P6.35) per pack; 
“Effective on January 1, 2007, Six pesos and seventy-four centavos 
(P6.74) per pack; 
“Effective on January 1, 2009, Seven pesos and fourteen centavos 
(P7.14) per pack; and 
“Effective on January 1, 201 1, Seven pesos and fifty-six centavos 
(P7.56) per pack. 
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“(3) If the net retail price (excluding the excise tax and the value- 
added tax) exceeds Six pesos and fifty centavos (P6.50) but does not 
exceed Ten pesos (PlO.00) per pack, the tax shall be: 
“Effective on January 1, 2005, Ten pesos and thirty-five centavos 
(P10.35) per pack; 
“Effective on January 1, 2007, Ten pesos and eighty-eight centavos 
(P10.88) per pack; 
“Effective on January 1, 2009, Eleven pesos and forty-three 
centavos (PI 1.43) per pack and; 
“Effective on January 1,201 1, Twelve pesos (P12.00) per pack; 
“(2) If the net retail price (excluding the excise tax and the value- 
added tax) exceeds Six pesos and fifty centavos (P6.50) but does exceed 
Ten pesos (P10.00) per pack, the tax shall be: 
“Effective on January 1, 2005, Twenty-five pesos (P25.00) per 
pack; 
“Effective on January 1, 2007, Twenty-six pesos and six centavos 
(P26.06 per pack; 
“Effective on January 1, 2009, Twenty-seven pesos and sixteen 
centavos (P27.16) per pack; and 
“Effective on January 1, 2011, Twenty-eight pesos and thirty 
centavos (P28.30) per pack.] 
“Variants of existing brands and variants of new brands of 
cigarettes which are introduced in the domestic market after the effectivity 
of this Act shall be taxed under the proper classification thereof based on 
their suggested net retail price: Provided, however, That such 
classification shall not, in any case, be lower than the highest classification 
of any variant of that brand. 
“A ‘variant of a brand’ shall refer to a brand on which a modifier is 
prefixed and/or suffixed to the root name of the brand. 
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“Duly registered or existing brands of cigarettes or new brands 
thereof packed by machine shall only be packed in twenties. 
“Any downward reclassification of present categories, for tax 
purposes, of existing brands of cigars and cigarettes duly registered at the 
time of the effectivity of this Act which will reduce the tax imposed herein, 
or the payment thereof, shall be prohibited. 
“New brands, as defined in the immediately following paragraph, 
shall initially be classified according to their suggested net retail price. 
“’New brand’ shall mean a brand registered after the date of 
effectivity of [R.A No. 82401 THIS ACT. 
“‘Suggested net retail price’ shall mean the net retail price at 
which new brands, as defined above, of locally manufactured or imported 
cigarettes are intended by the manufacturer or importer to be sold on retail 
in major supermarkets or retail outlets in Metro Manila for those marketed 
nationwide, and in other regions, for those with regional markets. At the 
end of three (3) months from the product launch, the Bureau of Internal 
Revenue shall validate the suggested net retail price of the new brand 
against the net retail prices as defined herein and determine the correct 
tax bracket under which a particular new brand of cigarette, as defined 
above, shall be classified. After the end of eighteen (18) months from 
such validation, the Bureau of Internal Revenue shall revalidate the initially 
validated net retail price against the net retail price as of the time of 
revalidation in order to finally determine the correct tax bracket under 
which a particular new brand of cigarettes shall be classified: [Provided, 
however, That brands of cigarettes introduced in the domestic market 
between January 1, 1997 and December 31, 2003 shall remain in the 
classification of new brands and brands introduced between January 1, 
1997 and December 31, 2003 shall not be revised except by an act of 
Congress]. 
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‘Net retail price’, as determined by the Bureau of Internal Revenue 
through a price survey to be conducted by the Bureau of Internal Revenue 
itself, or the National Statistics Office when deputized for the purpose by 
the Bureau of Internal Revenue, shall mean the price at which the 
cigarette is sold on retail in at least twenty (20) major supermarkets in 
Metro Manila (for brands of cigarettes marketed nationally), excluding the 
amount intended to cover the applicable excise tax and value-added tax. 
For brands which are marketed only outside Metro Manila , the ‘net retail 
price’, shall mean the price at which the cigarette is sold in at least five (5) 
major supermarkets in the region excluding the amount intended to cover 
the applicable excise tax and the value-added tax. 
[The classification of each brand of cigarettes based in its average 
net retail price as of October 1, 1996, as set forth in the Annex ID’, 
including the classification of brands for the same products which, 
although not set forth in said Annex ID’, 
were registered and were being 
commercially produced and marketed on or after October 1, 1996, and 
which continue to be commercially produced and marketed after the 
effectively of this Act, shall remain in force until revised by Congress.] 
“Manufacturers and importers of cigars and cigarettes shall, within 
thirty (30) days from the effectivity of this Act, and within the first five (5) 
days of every third month thereafter, submit to the Commissioner a sworn 
statement of the volume of sales for each particular brand of cigars and/or 
cigarettes sold at his establishment for the three-month period 
immediately preceding. 
Any manufacturer or importer who, in violation of this Section, 
knowingly misdeclares or misinterprets in his or its sworn statement herein 
required any pertinent data or information shall be penalized by summary 
cancellation or withdrawal of his or its permit to engage in business as 
manufacturer or importer of cigars and cigarettes. 
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Any corporation, association or partnership liable for any of the acts 
or omissions in violation of this Section shall be fined treble the amount of 
deficiency taxes, surcharges and interest which may be assessed 
pursuant to this Section. 
Any person liable for any of the acts or omissions prohibited under 
this Section shall be criminally liable and penalized under Section 254 of 
this Code. Any person who willfully aids or abets in the commission of any 
such act or omission shall be criminally liable in the same manner as the 
principal. 
If the offender is not a citizen of the Philippines, he shall be 
deported immediately after serving the sentence, without further 
proceedings for deportation. " 
SEC. 2. Implementing Rules and Regulations. - The Secretary of 
Finance shall, upon the recommendation of the Commissioner of Internal 
Revenue, promulgate the necessary rules and regulations for the effective 
implementation of this Act. 
SEC. 3. Repealing Clause. - All laws, decrees, executive orders, rules 
and regulations or parts thereof which are contrary to or inconsistent with this Act 
are hereby repealed, amended or modified accordingly. 
SEC. 4. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in any two newspapers of general 
circulation, whichever comes earlier. 
Approved, 
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