Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress
First Regular Session

6508

HOUSE BILL NO.

Introduced by Hon. Deogracias Victor “DV” B. Savellano

AN ACT
AMENDING SECTIONS 129, 164 AND 225 OF REPUBLIC ACT NO. 8424,
ASAMENDED, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE
CODE OF 1997, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

Illicit trade on tobacco products remain to be one problematic area for the Philippine
government. While there have been several increases in the excise tax on tobacco products,
particularly cigarettes, which resulted to billions of pesos in government coffers such increases
have also resulted to the proliferation of illicit trade on tobacco.

In a 2019 report of the Intellectual Property Office of the Philippines, through the
National Committee on IP Rights, it noted that the value of counterfeit items seized in 2018
reached a record high of P23.6 billion, the highest since the group’s creation in 2008 and
represents 188% more than the P8.2 billion seized in 2017. Among the goods most counterfeited,
cigarettes accounted for P20.3 billion.

The achievements of the excise tax reforms on tobacco products that reduced the
smoking incidence from 28.3% in 2009 to 22.7% in 2015 may be defeated by the continued
proliferation of fake/illicit tobacco products. Further, the government is losing billions in
foregone revenues that could augment further the funding requirements for the full
implementation of the Universal Health Care. It is imperative that the government put a special
focus on the illicit trade of tobacco products to better protect public health interests and ensure
the proper collection of taxes.

In view of the foregoing, the passage of bill is earnestly sought.

‘OR “DV” B. SAVELLANO

HON. DEOGRAt
AGS


Republic of the Philippines
House of Representatives
Quezon City, Metro Manila

Eighteenth Congress
First Regular Session

HOUSE BILL NO. eos

Introduced by Honorable Deogracias Victor “DV” B. Savellano

AN ACT
AMENDING SECTIONS 129, 164 AND 225 OF REPUBLIC ACT NO. 8424, AS
AMENDED, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE
CODE OF 1997, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Section 129 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“SEC.129. Goods subject to Excise Taxes. - Excise taxes apply to goods
manufactured or produced in the Philippines for domestic sales or consumption or
for any other disposition and to things imported. The excise tax imposed herein
shall be in addition to the value-added tax imposed under Title IV.

For purposes of this Title, excise taxes herein imposed and based on
weight or volume capacity or any other physical unit of measurement shall be
referred to as ‘specific tax’ and an excise tax herein imposed and based on selling
price or other specified value of the good shall be referred to as ‘ad valorem tax.’

THE BUREAU SHALL EXERCISE REGULATORY AUTHORITY
OVER ALL ARTICLES SUBJECT TO EXCISE TAX INCLUDING
THOSE PRODUCED OR KEPT IN AREAS DEEMED OR MANAGED AS
SEPARATE CUSTOMS TERRITORIES SUCH AS BUT NOT LIMITED
TO SPECIAL ECONOMIC ZONES, ECONOMIC ZONES AND
FREEPORTS. PENDING INVESTIGATION OF VIOLATIONS OF THIS
TITLE, THE LICENSES OF LOCATORS OPERATING INSIDE SUCH
SPECIAL ECONOMIC ZONES, ECONOMIC ZONES AND FREEPORTS,
SHALL BE SUSPENDED AND THEREAFTER REVOKED AFTER THE
COMMISSION OF THE OFFENSE IS ESTABLISHED BY THE
BUREAU.”


SECTION 2. Section 164 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

SEC. 164. Information to be Given by Manufacturers, Importers, Indentors,
and Wholesalers of any Apparatus or Mechanical Contrivance Specially for
the Manufacture of Articles Subject to Excise Tax and Importers, Indentors,
Manufacturers or Sellers of Cigarette Paper in Bobbins, Cigarette Tipping
Paper or Cigarette Filter Tips. - Manufacturers, indentors, wholesalers and
importers of any apparatus or mechanical contrivance specially for the
manufacture of articles subject to tax shall, before any such apparatus or
mechanical contrivance is removed from the place of manufacture or from the
customs house, give written information to the Commissioner as to the nature and
capacity of the same, the time when it is to be removed, and the place for which it
is destined, as well as the name of the person by whom it is to be used; and such
apparatus or mechanical contrivance shall not be set up nor dismantled or
transferred without a permit in writing from the Commissioner.

A written permit from the Commissioner for importing, manufacturing or
selling of cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette
filter tips is required before any person shall engage in the importation,
manufacture or sale of the said articles. No permit to sell said articles shall be
granted unless the name and address of the prospective buyer is first submitted to
the Commissioner and approved by him. Records, showing the stock of the said
articles and the disposal thereof by sale of persons with their respective addresses
as approved by the Commissioner, shall be kept by the seller, and records,
showing stock of said articles and consumption thereof, shall be kept by the
buyer, subject to inspection by internal revenue officers.

“THE MERE POSSESSION OF (1) ANY APPARATUS OR
MECHANICAL CONTRIVANCE FOR THE MANUFACTURE OF
CIGARETTES, CIGARETTE PAPER, CIGARETTE FILTER TIPS, OR
CIGARETTE TIPPING PAPER; AND (2) COUNTERFEIT OR
RECYCLED TAX STAMPS IN SUCH AGGREGATE
QUANTITY EQUIVALENT TO AN EXCISE TAX VALUE OF FIFTY
MILLION PESOS
(P50,000,000.00), WHETHER THE STAMPS ARE LOOSE AND/ OR
AFFIXED ON CIGARETTE PACKS, BY A MANUFACTURER,
DISTRIBUTOR, IMPORTER, INDENTOR OF CIGARETTES,
CIGARETTE PAPER, CIGARETTE TIPPING PAPER, OR CIGARETTE
FILTER TIPS, WHO ARE NOT DULY REGISTERED WITH OR
AUTHORIZED BY THE BIR,SHALL BE A VIOLATION OF THIS
SECTION. THE OFFENSE UNDER THIS PARAGRAPH SHALL BE
NON-BAILABLE AND PUNISHABLE WITH IMPRISONMENT OF
RECLUSION PERPETUA, AND WITH A FINE OF NOT LESS THAN


ONE HUNDRED MILLION PESOS (P100,000,000.00) OR UP TO TEN
TIMES THE EXCISE TAX VALUE OF THE TAX STAMPS HAD THESE
BEEN LEGAL FOR USE.

IN THE CASE OF ASSOCIATIONS, PARTNERSHIPS OR
CORPORATIONS, THE PENALTY SHALL BE IMPOSED ON THE
PARTNER, PRESIDENT, GENERAL MANAGER, BRANCH MANAGER,
TREASURER, AND OFFICER-IN-CHARGE.

ANY PERSON, NATURAL OR JURIDICAL, FOUND GUILTY
UNDER THIS ACT SHALL ALSO SUFFER THE PENALTY OF
PERPETUAL ABSOLUTE DISQUALIFICATION TO ENGAGE IN ANY
BUSINESS INVOLVING THE MANUFACTURE OR IMPORTATION OF
TOBACCO PRODUCTS.

IN APPLYING THE ABOVEMENTIONED PENALTIES, IF THE
OFFENDER IS A FOREIGN NATIONAL, HE/SHE SHALL BE
DETAINED WITHOUT BAIL FROM THE TIME OF ARREST OR
VOLUNTARY SURRENDER UNTIL THE TERMINATION OF THE
CRIMINAL PROCEEDINGS FOR THE VIOLATION OF THIS SECTION.
MOREOVER, HE/SHE SHALL NOT BE DEPORTED UNTIL AFTER
HE/SHE IS ACQUITTED OF THE OFFENSE OR AFTER HE/SHE HAD
SERVED THE SENTENCE.

SECTION 3. Section 225 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

SEC. 225, When Property to be Sold or Destroyed. - Sales of forfeited chattels
and removable fixtures shall be effected, so far as practicable, in the same manner
and under the same conditions as the public notice and the time and manner of
sale as are prescribed for sales of personal property distrained for the non-
payment of taxes.

istilled spirits, liquors, cigars, cigarettes, other manufactured products of
tobacco, and all apparatus used in or about the illicit production of such articles
[mey} SHALL, upon forfeiture, be destroyed by order of the Commissioner,
when the sale of the same for consumption or use would be injurious to public
health or prejudicial to the enforcement of the law.

All other articles subject to excise tax, which have been manufactured or
removed in violation of this Code, as well as dies for the printing or making of
internal revenue stamps and labels which are in imitation of or purport to be
lawful stamps, or labels [may} SHALL, upon forfeiture, be sold or destroyed in
the discretion of the Commissioner.


Forfeited property shall not be destroyed until at least twenty (20) days
after seizure.”

SECTION 4. Repealing Clause. All laws, executive orders, presidential decrees, rules
and regulations and other issuances contrary to or inconsistent with this Act shall be deemed
repealed or modified accordingly.

SECTION 5. Separability Clause. — If any provision of this Act is subsequently
declared invalid or unconstitutional, the other provisions hereof which are not affected thereby
shall remain in full force and effect.

SECTION 6. Effectivity. This Act shall take effect fifteen (15) days from the date of
publication in the Official Gazette or in a newspaper of general circulation.

Approved,