Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

3666

House Bill No..

Introduced by HON. PAOLO EVERARDO S. JAVIER

EXPLANATORY NOTE

Tobacco is a product that has adverse health consequences. Hence,
excise taxes are levied to curb consumption.

Nevertheless, tobacco remains a legitimate product and smoking
continues to be a personal lifestyle choice. In Addition, government derives
significant revenues from tobacco and its related industries, and the tobacco
industry provides livelihood to 2.7 million Filipinos based on estimates of the
National Tobacco Administration.

It therefore behooves government to adopt a balanced policy on excise
taxation to achieve public health and fiscal objectives.

Under section 5 of Republic Act No. 9334, the last tax increase on
cigarettes packed by machines is due on January 1, 2011. To preserve and
increase the stable flow of revenues, government should retain the current
excise tax system and hike the rates beginning January 1, 2012.

The foregoing bill proposes to increase the 2011 rates by adjusting these
to inflation (4% est.) and by adding thereto an absolute amount to seventeen
centavos (Php 0.17) per pack across all tax tiers. The proposed increases will be
implemented on January 1, 2012, with subsequent increases taking effect on
January 1, 2014 and January 1, 2016.

The increase in excise revenues from tobacco will give government more
resources to provide the services that our people deserve.

From the foregoing, the passage of this bill is earnestly sought.

St
Lone oisrgt of Antique

‘es


3666

AN ACT INCREASING THE EXCISE TAX RATES IMPOSED ON TOBACCO PRODUCTS,
AMENDING FOR THE PURPOSE SECTIONS 145 OF THE NATIONAL INTERNAL,
REVENUE CODE OF 1997, AS AMENDED

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

SECTION 1. Section 145 of the National Intemal Revenue Code, as amended BY
REPUBLIC ACT NO. 9334, , is further amended to read as follows:

“SEC. 145, Cigars and Cigarettes. —
x x ms

['(B) Cigarettes Packed by Hand. - There shall be levied, assessed and collected on
cigarettes packed by hand a tax at the rates prescribed below:

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 only 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:

(1) 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.


(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, 2011, Seven pesos and fifty-six centavos
(P7.56) per pack.

(3) If the net retail price (excluding the excise tax and the value-added tax)
exceeds Six pesos and fifty centavos (P6.50) but doesnot exceed Ten pesos (PI0.00)
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
(P11.43) per pack; and

Effective on January 1, 2011, Twelve pesos (P12.00) per pack.

(4) If the net retail price (excluding the excise tax and the value-added tax) is
above 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.]


(B) CIGARETTES PACKED BY HAND. - THERE SHALL BE LEVIED, ASSESSED
COLLECTED ON CIGARETTES PACKED BY HAND A TAX AT THE RATES
PRESCRIBED BELOW:

EFFECTIVE JANUARY 1, 2012, THREE PESOS (P3.00) PER PACK;

EFFECTIVE JANUARY 1, 2014, THREE PESOS AND TWENTY-E
PER PACK; AND

HT (P3.28)

EFFECTIVE JANUARY 1, 2016, THREE PESOS AND FIFTY-EIGHT CENTAVOS
(P3.58) PER PACK.

DULY REGISTERED OR EXISTING BRANDS OF CIGARETTES OR NEW BRANDS
THEREOF PACKED BY HAND SHALL ONLY BE PACKED IN THIRTIES.

(C) CIGARETTES PACKED BY MACHINE. - THERE SHALL BE LEVIED, ASSESSED
COLLECTED ON CIGARETTES PACKED BY MACHINE A TAX AT THE RATES
PRESCRIBED BELOW:

(1) IF THE NET RETAIL PRICE (EXCLUDING EXCISE TAX AND VALUE-ADDED
TAX) IS BELOW FIVE PESOS (P5.00) PER PACK, THE TAX SHALL BE:

EFFECTIVE JANUARY 1, 2012, THREE PESOS (P3.00) PER PACK;

EFFECTIVE JANUARY 1, 2014, THREE PESOS AND TWENTY-EIGHT (P3.28)
PER PACK; AND

EFFECTIVE JANUARY 1, 2016, THREE PESOS AND FIFTY-EIGHT CENTAVOS
(P3.58) PER PACK.

(2) IF THE NET RETAIL PRICE (EXCLUDING EXCISE TAX AND 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 JANUARY 1, 2012, EIGHT PESOS AND THR!
(P8.03) PER PACK;

ENTAVOS

EFFECTIVE JANUARY 1, 2014, EIGHT PESOS AND FIFTY-TWO
CENTAVOS (P8.52) PER PACK; AND

EFFECTIVE JANUARY 1, 2016, NINE PESOS AND TWO CENTAVOS
(P9.02) PER PACK.

(3) IF THE NET RETAIL PRICE (EXCLUDING EXCISE TAX AND VALUE-ADDED
TAX) EXCEEDS SIX PESOS AND FIFTY CENTAVOS (P6.50) BUT DOES NOT EXCEED
TEN PESOS (P10.00) PER PACK, THE TAX SHALL BE:

EFFECTIVE JANUARY 1, 2012, TWELVE PESOS AND SIXTY-FIVE
CENTAVOS (P12.65) PER PACK;


EFFECTIVE JANUARY 1, 2014, THIRTEEN PESOS AND THIRTY-TWO
CENTAVOS (P13.32) PER PACK; AND

EFFECTIVE JANUARY 1, 2016, FOURTEEN PESOS AND TWO
CENTAVOS (P14.02) PER PACK.

(4) IF THE NET RETAIL PRICE (EXCLUDING EXCISE TAX AND VALUE-ADDED
TAX) IS ABOVE TEN PESOS (P10.00) PER PACK, THE TAX SHALL BE:

EFFECTIVE JANUARY 1, 2012, TWENTY-NINE PESOS AND SIXTY
CENTAVOS (P29.60) PER PACK;

EFFECTIVE JANUARY 1, 2014, THIRTY PESOS AND NINETY-FIVE
CENTAVOS (P30.95) PER PACK; AND

EFFECTIVE JANUARY 1, 2016, THIRTY-TWO PESOS AND THIRTY-FIVE
CENTAVOS (P32.35) 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.

[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 lime 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. 8240.

“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 price 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 intemal 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 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 Intemal Revenue through a price survey to
be conducted by the Bureau of Intemal 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 the value-added tax. For brands which are marketed only outside
Metro Manila, the ‘net retail price’ shall mean the price al which the cigaretie 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 on its average net retail price as of
October 1, 1996, as set forth in Annex D’, 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 effectivity 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 month thereafter, submit to the
Commissioner a sworn statement of the volume of sales for each particular brand of cigars
andlor 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
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 aggregate 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 wilfully 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.”

SECTION 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.

SECTION 3. Separability Clause. - If any of the provisions of this Act is declared invalid by
a competent court, the remainder of this Act or any provision not affected by such declaration
of invalidity shall remain in force and effect.


SECTION 4. Repealing Clause. - All laws, decrees, ordinances, rules and regulations,
executive or administrative orders, and such other presidential issuances as are inconsistent
with any of the provisions of this Act are hereby repealed, amended or otherwise modified
accordingly.

SECTION 4. Effectivity. - This Act shall take effect on January 1, 2013.

Approved,