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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

18TH CONGRESS
First Regular Session

HOUSE BILL No. _2957_ ee

Introduced by Representative Michael L. Romero

AN ACT
INCREASING THE EXCISE TAX ON ALCOHOL PRODUCTS,
HEATED TOBACCO PRODUCTS AND VAPOR PRODUCTS,
AMENDING FOR THIS PURPOSE SECTIONS 141, 142, 143, 144
(B), 144(C), 147 AND 150 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER
PURPOSES

EXPLANATORY NOTE

Republic Act (RA) 10351 or the Sin Tax Reform was signed into law in
December 2012. The law is a good governance measure with positive impact on
both fiscal and public health. RA 10351 corrected the long-standing weaknesses
of the tobacco and alcohol excise tax system and increased the rates to reduce
the demand for these products. The Sin Tax Law also raised much needed
revenues to fund the Universal Health Care (UHC) program of the government.

The Sin Tax Law has been an unqualified success in its health and revenue
objectives. Since its implementation in 2013, the government collected P427.6
billion pesos in incremental revenues (CY 2013-2018), of which P132.8 billion or
31.1 percent is from alcohol. This has increased the budget of the Department
of Health (DOH) as the incremental revenues derived from RA 10351 were largely
earmarked for UHC. The DOH budget more than tripled from P53.2 billion in
2013 to P166.7 billion in 2018 or a growth of 213.2 percent. A large amount of


the incremental revenues earmarked for health is allocated for expanded health
services and premium subsidies for the health insurance of indigents and senior
citizens not covered by the National Health Insurance Program. As a result,
Philippine Health Insurance Corporation (PhilHealth) almost tripled the coverage
of the poor and the near poor from 5.2 million in 2013 to 15.7 million indigents
by the end of 2018.

However, with the passage of RA 11223 or the UHC Law, funding requirement
increased substantially. The estimated funding for its first year of
implementation alone costs P257 billion, and a total of P1.4 trillion from 2020 to
2024. The implementation of the UHC Law will be funded by the sin tax
earmarked funds through the regular annual budget of the DOH and PhilHealth,
Philippine Gaming Corporation (PAGCOR), Philippine Charity Sweepstakes
Office (PCSO), and PhilHealth premium contributions. Of the P257 billion
funding requirement for 2020, only P195 billion will be funded by these sources,
incurring a funding gap of P62 billion.

In order to reduce this funding gap, Congress approved a bill increasing excise
tax on tobacco products, and imposed new taxes on heated tobacco products
(HTPs) and vapor products. The estimated revenue generated under the
Congress-approved bill is P15.7 billion in 2020, and a total of P129.9 billion from
2020 to 2024. However, this amount is not enough to close the funding gap of
the UHC Law.

This bill seeks to increase the tax on alcohol products, and HTPs and vapor
products to provide additional funding source for the UHC Law in order to further
reduce the funding gap. This additional funding will help sustain PhilHealth
coverage for all Filipino families; improve accessibility, affordability, and quality
of health care; and provide better outpatient benefit package, including check-
up or consultation and medicines.

An equally important objective of the bill is to discourage excessive consumption
of alcohol products especially among the youth. Excessive alcohol drinking leads
to diseases like cirrhosis or liver damage and pancreatitis, among others.
Moreover, alcohol drinking leads to behaviors like drunk driving and domestic
violence. According to Online National Electronic Injury Surveillance System of
the DOH, there were 3,213 vehicular accidents due to alcohol intoxication or 5.9
percent of the 54,177 transport or vehicular crash-related injury cases in 2018.
This has more than doubled from 1,376 alcohol-related accidents in 2013. This
reform seeks to bring us close to the DOH target of 10.0 percent reduction in
harmful alcohol consumption.

The increase in excise tax rates on HTPs is in line with the definition of cigarettes
under Republic Act (RA) No. 9211. Cigarettes are defined as any roll or tubular
construction, which contain tobacco or its derivatives, and intended to be burned
or heated under ordinary conditions of use. Further, Section 147 of the 1997 Tax


Code, as amended, defines cigarettes as rolls of finely cut leaf tobacco, or any
substitute therefor, wrapped in paper or in any other material. Since HTPs are
of roll or tubular construction that contain tobacco materials and several filter
sections wrapped in paper intended to be heated, these products should be
classified as cigarettes subject to the same excise tax rate.

The health impact and safety of using vapor products and whether it is an aid to
cigarette smoking cessation have not yet received conclusive evidence. However,
because of the established addictive effect of nicotine, we propose to increase the
excise tax rates of vapor products to discourage consumption. To prevent the
children and youth from consuming vapor products, variants with flavoring other
than plain tobacco or plain menthol, are proposed to be prohibited.

Imposing higher excise taxes is still the most effective Policy tool to affect prices
to discourage consumption of sin products, in particular, among the youth and
the poor who are the most sensitive to price changes.

ig, the passage of this bill is earnestly sought.

L. ROMERO Ph.D.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

18TH CONGRESS
First Regular Session

2957 -
HOUSE BILL NO.

Introduced by Representative Michael L. Romero

AN ACT
INCREASING THE EXCISE TAX ON ALCOHOL PRODUCTS,
HEATED TOBACCO PRODUCTS AND VAPOR PRODUCTS,
AMENDING FOR THIS PURPOSE SECTIONS 141, 142, 143, 144
(B), 144(C), 147 AND 150 OF THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER
PURPOSES

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

Congress assembled:

SECTION 1. Chapter III of the National Internal Revenue Code of 1997
(NIRC), as amended, is hereby amended, which shall read as follows:

CHAPTER III - EXCISE TAX ON ALCOHOL PRODUCTS,
SEC. 141. Distilled Spirits. - On distilled spirits, subject to the
provisions of Section 133 of this Code, an excise tax shall be levied,
assessed and collected based on the following schedules:

[la) Effective on January 1, 2013


(1) An ad valorem tax equivalent to fifteen percent (15%) of the
net retail price (excluding the excise tax and the value-added
tax) per proof; and

(2) In addition to the ad valorem tax herein imposed, a specific
tax of Twenty pesos (P20.00) per proof liter.

(b) Effective on January 1, 2015

(1) An ad valorem tax equivalent to twenty percent (20%) of
the net retail price (excluding the excise tax and the value-
added tax) per proof; and

(2) In addition to the ad valorem tax herein imposed, a specific
tax rate of Twenty pesos (P20.00) per proof liter.

(c) In addition to the ad valorem tax herein imposed, the specific tax
rate of Twenty pesos (P20.00) per proof liter imposed under this
Section shall be increased by four percent (4%) every year thereafter
effective on January 1, 2016, through revenue reguiations issued by
the Secretary of Finance]

(A) EFFECTIVE ON JANUARY 1, 2020

(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE
PERCENT (25%) OF THE NET RETAIL PRICE (EXCLUDING
THE EXCISE TAX AND THE VALUE-ADDED TAX) PER
PROOF; AND

(2) IN ADDITION TO THE AD VALOREM TAX HEREIN
IMPOSED, A SPECIFIC TAX OF FORTY PESOS (P40.00)
PER PROOF LITER.

(B) EFFECTIVE ON JANUARY 1, 2021

(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE
PERCENT (25%) OF THE NET RETAIL PRICE (EXCLUDING
THE EXCISE TAX AND THE VALUE-ADDED TAX) PER
PROOF; AND

(2) IN ADDITION TO THE AD VALOREM TAX HEREIN
IMPOSED, A SPECIFIC TAX OF FORTY-FIVE PESOS
(P45.00) PER PROOF LITER.

(C) EFFECTIVE ON JANUARY 1, 2022

(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE
PERCENT (25%) OF THE NET RETAIL PRICE (EXCLUDING
THE EXCISE TAX AND THE VALUE-ADDED TAX) PER
PROOF; AND


(2) IN ADDITION TO THE AD VALOREM TAX HEREIN
IMPOSED, A SPECIFIC TAX OF FIFTY PESOS (P50.00) PER
PROOF LITER.

(D) EFFECTIVE ON JANUARY 1, 2023

(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE
PERCENT (25%) OF THE NET RETAIL PRICE (EXCLUDING
THE EXCISE TAX AND THE VALUE-ADDED TAX) PER
PROOF; AND .

(2) IN ADDITION TO THE AD VALOREM TAX HEREIN
IMPOSED, A SPECIFIC TAX OF FIFTY-FIVE PESOS
(P55.00) PER PROOF LITER.

(E) IN ADDITION TO THE AD VALOREM TAX HEREIN IMPOSED,
THE SPECIFIC TAX IMPOSED UNDER THIS SECTION SHALL BE
INCREASED BY TEN PERCENT (10%) EVERY YEAR
THEREAFTER EFFECTIVE ON JANUARY 1, 2024, THROUGH
REVENUE REGULATIONS ISSUED BY THE SECRETARY OF
FINANCE.

Medicinal preparations, flavoring extracts, and all other
preparations, except toilet preparations, of which, excluding water,
distilled spirits from the chief ingredient, shall be subject to the
same tax as such chief ingredient.

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 substance 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 or 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 fifteen degrees centigrade
(15C). A ‘proof liter’ means a liter of proof spirits.

‘Net retail price’ shall mean the price at which the distilled spirits is
sold on retail in at least five (5) major supermarkets in Metro Manila,
excluding the amount intended to cover the applicable excise tax

3 .


and the value-added tax. For distilled spirits 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. PROVIDED THAT
THE NET. RETAIL PRICE SHALL BE INITIALLY PROVIDED BY
THE MANUFACTURER THROUGH A SWORN STATEMENT AND
SHALL BE VALIDATED BY THE BUREAU OF INTERNAL
REVENUE THROUGH A PRICE SURVEY.

Major supermarkets, as contemplated under this Act, shall be those
with the highest annual gross sales in Metro Manila or the region,
as the case may be, as determined by the BUREAU OF INTERNAL
REVENUE [National Statistics Office], and shall exclude retail
outlets or kiosks, convenience or sari-sari stores, and others of a
similar nature:

Provided, That no two (2) supermarkets in the list to be
surveyed are affiliated and/or branches of each other:

Provided, finally, That in case a particular distilled spirit is not
sold in major supermarkets, the price survey’ can be conducted in
retail outlets where said distilled spirit is sold in Metro Manila or the
region, as the case may be, upon the determination of the
Commissioner of Internal Revenue.

The net retail price shall be determined by the Bureau of Internal
Revenue through [a] BIANNUAL price survey under oath.

The methodology and all pertinent documents used in the conduct
of the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
(COCCTRP) created under Republic Act No. 8240.

Understatement of the suggested net retail price by as much as
fifteen percent (15%) of the actual net retail price shall render the
manufacturer or importer 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.

Distilled spirits introduced in the domestic market after the
effectivity of this Act shall be initially taxed according to their
suggested net retail prices.

‘Suggested net retail price’ shall mean the price (excluding the value-
added tax and the excise tax) at which locally manufactured or
imported distilled spirits are intended by the manufacturer or
importer to be sold on retail in major supermarkets or retail outlets

4


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 initially determine the
correct tax on a newly introduced distilled spirits. After the end of
nine (9) 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 on a newly introduced distilled
spirits. .

[All distilled spirits existing in the market at the time of the effectivity
of this Act shall be taxed according to the tax rates provided above
based on the latest price survey of the distilled spirits conducted by
the Bureau of Internal Revenue.]

The methodology and all pertinent documents used in the conduct
of the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.

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 AND REMOVALS for each
particular brand of distilled spirits sold at his establishment for the
three-month period immediately preceding.

Any manufacturer or importer who, in violation of this Section,
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.

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.

5


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. 142. Wines. - On wines, there shall be collected per liter of
volume capacity effective on [January 1, 2013] JANUARY 1, 2020,
the following excise taxes:

(a) Sparkling wines/champagnes regardless of proof, if the net
retail price per bottle of seven hundred fifty milliliter (750 ml.)
volume capacity (excluding the excise tax and value-added
tax) is:

(1) Five hundred pesos (P500.00) or less - [Two hundred
fifty pesos (P250.00)] THREE HUNDRED FORTY-
EIGHT PESOS (P348.00); and

(2) More than Five hundred pesos (P500.00) - [Seven
hundred pesos (P700.00)] NINE HUNDRED SEVENTY-
FOUR PESOS (P974.00). .

(b) Still wines and carbonated wines containing fourteen
percent (14%) of alcohol by volume or less, [Thirty pesos
(P30.00)] FORTY-TWO PESOS (P42.00); and

(c) Still wines and carbonated wines containing more than
fourteen percent (14%) but not more than twenty-five percent
(25%) of alcohol by volume, [Sixty pesos (P60.00)] EIGHTY-
FOUR PESOS (P84.00).

The rates of tax imposed under this Section shall be increased by
[four percent (4%)] TEN PERCENT (10%) every year thereafter
effective on January 1, [2014] 2021, through revenue regulations
issued by the Secretary of Finance.

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’ shall mean the price at which sparkling
wine/champagne is sold on retail in at least five (5) major
supermarkets in Metro Manila, excluding the amount intended to
cover the applicable excise tax and the value-added tax. For
sparkling wines/champagnes which are marketed outside Metro

6


Manila, the ‘net retail price’ shall mean the price at which the wine
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. PROVIDED THAT THE NET RETAIL PRICE
SHALL BE INITIALLY PROVIDED BY THE MANUFACTURER
THROUGH A SWORN STATEMENT AND SHALL BE VALIDATED
BY THE BUREAU OF INTERNAL REVENUE THROUGH A PRICE
SURVEY.

Major supermarkets, as contemplated under this Act, shall be those
with the highest annual gross sales in Metro Manila or the region,
as the case may be, as determined by the BUREAU OF INTERNAL
REVENUE [National Statistics Office], and shall exclude retail
outlets or kiosks, convenience or sari-sari stores, and others of a
similar nature:

Provided, That no two (2) supermarkets in the list to be
surveyed are affiliated and/or branches of each other:

Provided, finally, That in case a particular sparkling
wine/champagne is not sold in major supermarkets, the price
survey can be conducted in retail outlets where said sparkling
wine/champagne is sold in Metro Manila or the region, as the case
may be, upon the determination of the Commissioner of Internal
Revenue.

The net retail price shall be determined by the Bureau of Internal
Revenue through [a] BIANNUAL price survey under oath.

The methodology and all pertinent documents used in the conduct
of the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.

Understatement of the suggested net retail price by as much as
fifteen percent (15%) of the actual net retail price shall render the
manufacturer or importer 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.

Sparkling wines/champagnes introduced in the domestic market
after the effectivity of this Act shall be initially tax classified
according to their suggested net retail prices.

‘Suggested net retail price’ shall mean the price (excluding VAT and
excise tax) at which locally manufactured or imported sparkling
wines/champagnes are intended by the manufacturer or importer
to be sold on retail in major supermarkets or retail outlets in Metro

7


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 sparkling wine/champagne against
the net retail price as defined herein and initially determine the
correct tax bracket to which a newly introduced sparkling
wine/champagne shall be classified. After the end of nine (9) 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 to which a newly introduced sparkling
wine/champagne shall be classified.

The proper tax classification of sparkling wines/champagnes,
whether registered before or after the effectivity of this Act, shall be
determined every two (2) years from the date of effectivity of this Act.

[All sparkling wines/champagnes existing in the market at the time
of the effectivity of this Act shall be taxed according to the net retail
prices and the tax rates provided above based on the latest price
survey of the sparkling wines/champagnes conducted by the
Bureau of Internal Revenue.] .

The methodology and all pertinent documents used in the conduct
of the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.

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 AND REMOVALS 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,
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 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.

8


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. 143, ALCOPOPS AND Fermented Liquor. - There shall be
levied, assessed and collected an excise tax on ALCOPOPS, beer,
lager beer, ale, porter and other fermented liquors except tuba, basi,
tapuy and similar domestic fermented liquors in accordance with
the following schedule:

[Effective on January 1, 2013

(a) If the net retail price (excluding the excise tax and the
value-added tax] per liter of volume capacity is Fifty pesos and
sixty centavos (P50.60) or less, the tax shall be Fifteen pesos
(P15.00) per liter; and

(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than Fifty
pesos and sixty centavos (P50.60), the tax shall be Twenty
pesos (P20.00) per liter.

Effective on January 1, 2014

(a) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is Fifty pesos
and sixty centavos (P50.60) or less, the tax shall be
Seventeen pesos (P17.00) per liter; and

(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than
Fifty pesos and sixty centavos (P50.60), the tax shall be
Twenty-one pesos (P21.00) per liter.

Effective on January 1, 2015

(a) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is Fifty pesos
and sixty centavos (P50.60) or less, the tax shall be
Nineteen pesos (P19.00) per liter; and


(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than
Fifty pesos and sixty centavos (P50.60), the tax shall be
Twenty-two pesos (P22.00) per liter..

Effective on January 1, 2016

(a) If the net retail price (excluding the excise tax and the
value-added tax) per'liter of volume capacity is Fifty pesos
and sixty centavos (P50.60) or less, the tax shall be Twenty-
one pesos (P21.00) per liter; and

(b) If the net retail price (excluding the excise tax and the
value-added tax) per liter of volume capacity is more than Fifty
pesos and sixty centavos (P50.60), the tax shall be Twenty-
three pesos (P23.00) per liter.

Effective on January 1, 2017, the tax on all fermented liquors shall
be Twenty-three pesos and fifty centavos (P23.50) per liter.]

EFFECTIVE ON JANUARY 1, 2020, THE TAX ON ALL
FERMENTED LIQUORS REGARDLESS IF MANUFACTURED IN
FACTORIES OR SOLD AND BREWED AT MICRO-BREWERIES OR
SMALL ESTABLISHMENTS SUCH AS PUBS AND RESTAURANTS
SHALL BE FORTY PESOS (P40.00) PER LITER.

EFFECTIVE ON JANUARY 1, 2021, THE TAX ON ALL
FERMENTED LIQUORS REGARDLESS IF MANUFACTURED IN
FACTORIES OR SOLD AND BREWED AT MICRO-BREWERIES OR
SMALL ESTABLISHMENTS SUCH AS PUBS AND RESTAURANTS
SHALL BE FORTY-FIVE PESOS (P45.00) PER LITER.

EFFECTIVE ON JANUARY 1, 2022, THE TAX ON ALL
FERMENTED LIQUORS REGARDLESS IF MANUFACTURED IN
FACTORIES OR SOLD AND BREWED AT MICRO-BREWERIES OR
SMALL ESTABLISHMENTS SUCH AS PUBS AND RESTAURANTS
SHALL BE FIFTY PESOS (P50.00) PER LITER.

EFFECTIVE ON JANUARY 1, 2023, THE TAX ON ALL
FERMENTED LIQUORS REGARDLESS IF MANUFACTURED IN
FACTORIES OR SOLD AND BREWED AT MICRO-BREWERIES OR
SMALL ESTABLISHMENTS SUCH AS PUBS AND RESTAURANTS
SHALL BE FIFTY-FIVE PESOS (P55.00) PER LITER.

The rates of tax imposed under this Section shall be increased by
[four percent (4%]] TEN PERCENT (10%) every year thereafter

10


effective on January 1, [2018] 2024, through revenue regulations
issued by the Secretary of Finance. [However, in case of fermented
liquors affected by the ‘no downward reclassification’ provision
prescribed under this Section, the four percent (4%) increase shall
apply to their respective applicable tax rates.]

‘ALCOPOPS’ SHALL MEAN PRE-MIXED ALCOHOLIC
BEVERAGES WITH ALCOHOL CONTENT OF LESS THAN 10%
ALCOHOL BY VOLUME AND WHICH ALCOHOL IS FROM MALT
OR WINES OR A DISTILLATION PROCESS. ALCOPOPS SHALL BE
TAXED AS FERMENTED LIQUOR.

[Fermented liquors which are brewed and sold at micro-breweries or
small establishments such as pubs and restaurants shall be subject
to the rate of Twenty-eight pesos (P28.00) ‘per liter effective on
January 1, 2013:

Provided, That this rate shall be increased by four percent
(4%) every year thereafter effective on January 1, 2014, through
revenue regulations issued by the Secretary of Finance.]

[Fermented liquors introduced in the domestic market after the
effectivity of this Act shall be initially tax classified according to their
suggested net retail prices.]

[Suggested net retail price’ shall mean the net retail price at which
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
newly introduced fermented liquor against the net retail price as
defined herein and initially determine the correct tax bracket to
which a newly introduced fermented liquor, as defined above, shall
be classified. After the end of nine (9) 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 to
which a newly introduced fermented liquor shall be classified ]

['Net retail price’ shall mean the price at which the fermented liquor
is sold on retail in at least five (5) 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

1


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.]

[Major supermarkets, as contemplated under this Act, shall be those
with the highest annual gross sales in Metro.Manila or the region,
as the case may be, as determined by the National Statistics Office,
and shall exclude retail outlets or kiosks, convenience or sari-sari
stores, and others of a similar nature: Provided, That no two (2)
supermarkets in the list to be surveyed are affiliated and/or
branches of each other:

Provided, finally, That in case a particular fermented liquor is
not sold in major supermarkets, the price survey can be conducted
in retail outlets where said fermented liquor is sold in Metro Manila
or the region, as the case may be, upon the determination of the
Commissioner of Internal Revenue.]

[The net retail price shall be determined by the Bureau of Internal
Revenue (BIR) through a price survey under oath.]

[The methodology and all pertinent documents used in the conduct
of the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.]

[Understatement of the suggested net retail price by as much as
fifteen percent (15%) of the actual net retail price shall render the
manufacturer or importer 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.]

[Any downward reclassification of present categories, for tax
purposes, of fermented liquors 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]

[The proper tax classification of fermented liquors, whether
registered before or after the effectivity of this Act, shall be
determined every two (2) years from the date of the effectivity of this
Act]

[All fermented liquors existing in the market at the time of the
effectivity of this Act shall be classified according to the net retail
prices and the tax rates provided above based on the latest price

survey of the fermented liquors conducted by the Bureau of Internal
Revenue]

12


[The methodology and all pertinent documents used in the conduct
of the latest price survey shall be submitted to the Congressional
Oversight Committee on the Comprehensive Tax Reform Program
created under Republic Act No. 8240.]

Every brewer or importer of ALCOPOPS AND/OR 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 AND
REMOVALS for each particular brand of ALCOPOPS AND/OR
fermented liquor sold at his establishment for the three-month
period immediately preceding.

Any brewer or importer who, in violation of this Section, 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 brewer or importer of ALCOPOPS AND/OR fermented
liquor.

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, withoyt further proceedings
for deportation.

SECTION 2. Section 144 (B) and 144 (C) of the National Internal Revenue
Code of 1997, as amended, are hereby further amended to read as follows:

Sec. 144 (B) Heated Tobacco Products. - There shall be levied,
assessed and collected on heated tobacco products an excise tax at
the rate prescribed below:

13


“(1) [Ten pesos (P10.00)] FORTY-FIVE PESOS (P45.00) per
pack of twenty (20) units or packaging combinations of not more
than twenty (20) units effective on January 1, 2020;

“FIFTY PESOS (P50.00) per pack of twenty (20) units or

packaging combinations of not more than twenty (20) units

effective on January 1, 202[0]1;

“FIFTY-FIVE PESOS (P55.00) per pack of twenty (20) units

or packaging combinations of not more than twenty (20) units

effective on January 1, 202[0}2;

“SIXTY PESOS (P60.00) per pack of twenty (20) units or

packaging combinations of not more than twenty (20) units

effective on January 1, 202{0]3;

2) PROVIDED THAT t[TJhe rates of tax imposed under this
Subsection shall be increased by five percent (5%) every year
effective on January 1, 202[1]4, through revenue regulations issued
by the Secretary of Finance.

“Heated tobacco products shall only be packed in twenties and
other packaging combinations of not more than twenty (20) units.

“No heated tobacco products manufactured in the Philippines
and produced for export shall be removed from their place of
manufacture or exported without posting of an export bond
equivalent to the amount of the excise tax due thereon if sold
domestically:

Provided, however, That heated tobacco products for export
may be transferred from the place of manufacture to a bonded
facility, upon posting of a transfer bond, prior, to export.

“Heated tobacco products imported into the Philippines and
destined for foreign countries shall not be allowed entry without
posting a bond equivalent to the amount of customs duty, excise
and value-added taxes due thereon if sold domestically.

“Manufacturers, distributors, and importers of heated 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 AND
REMOVALS for each particular brand of heated tobacco products
sold for the three-month period immediately preceding.

“Any manufacturer, distributor, or importer who, in violation
of this Section, misdeclares, or misrepresents in his or its sworn
statement herein required any pertinent data or information shall,
upon the final findings by the Commissioner that the violation was
committed, be penalized by a summary cancellation or withdrawal
of his/her or its permit to engage in business as manufacturer,
distributor, or importer of heated tobacco products.

“any corporation, association or partnership liable for any of
the acts or omissions in violation of this Section shall be fined treble

14


the amount of deficiency taxes, surcharges and interest which may
be assessed pursuant to this Section.

“SELLING OF HEATED TOBACCO PRODUCTS AT A PRICE
LOWER THAN THE COMBINED EXCISE AND VALUE-ADDED
TAXES IMPOSED UNDER THE LAW SHALL BE PROHIBITED.
THE SELLER OF SUCH PRODUCTS SHALL BE PUNISHED WITH
A FINE OF NOT LESS THAN TEN (10) TIMES THE AMOUNT OF
EXCISE PLUS VALUE-ADDED TAXES DUE BUT NOT LESS THAN
TWO HUNDRED THOUSAND PESOS (P200,000.00) NOR MORE
THAN FIVE HUNDRED THOUSAND PESOS (500,000.00), AND
IMPRISONMENT OF NOT LESS THAN FOUR (4) YEARS BUT NOT
MORE THAN SIX (6) YEARS.

“THE BUREAU OF INTERNAL REVENUE IS MANDATED TO
ISSUE A REVENUE REGULATION PRESCRIBING THE FLOOR
PRICE OR THE MINIMUM PRICE OF HEATED TOBACCO
PRODUCT TAKING INTO ACCOUNT THE SUM OF THE EXCISE
AND VALUE-ADDED TAXES AS PROVIDED HEREIN.

“Any person liable for any of the acts ot 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/she shall
be deported immediately after serving the sentence, without further
proceedings for deportation.

“The sale and distribution, or transfer of heated tobacco
products by any person to minors; purchasing, or otherwise
receiving heated tobacco products from a minor; and the sale,
purchase, and use of heated tobacco products by minors, shall be
Prohibited. ‘Minor’ refers to any person below eighteen (18) years
old. Any violation of this provision shall be punishable with the same
penalties provided for in Republic Act No. 9211, otherwise known as
the “Tobacco Regulation Act of 2003’.

“It shall not be a defense for the person selling or distributing
that he/she did not know nor had any reason to believe that the
product was for the consumption of the minor to whom it was sold.

“Unit packets and any outside wrapping of heated tobacco
products and other similar products shall carry a health warning
compliant with the Republic Act No. 10643, otherwise known as
“The Graphic Health Warnings Law’.

“Manufacturers and importers are given a period of one (1)
year from the effectivity of this Act to comply therewith.

“Eighteen (18) months after the effectivity of this Act, no
person or legal entity shall sell or commercially distribute or display
any heated tobacco product without ensuring that the labels and

15


packages, as well as any other container used in displaying the said
products meet the requirements under this Act.

“Any violation of the foregoing provisions on health warnings
shall be punishable with the same penalties as provided for in
Republic Act No. 10643, otherwise known as “The Graphic Health
Warnings Law.”

“Section 144 (C) Vapor Products. — [There shall be levied,
assessed and collected on vapor products excise tax at the rates
prescribed below:] VAPOR PRODUCT SHALL INCLUDE NICOTINE
SALT/SALT NICOTINE, AND CONVENTIONAL “FREEBASE” OR
“CLASSIC” NICOTINE, AND OTHER SIMILAR PRODUCTS AS
MAY BE DETERMINED BY REVENUE REGULATION:

[‘(1) Effective on January 1, 2020, individual cartridge, refill,
pod, or container of vapor products containing liquid solutions or
gel sold in the following quantities:

Quantity Excise tax

0.00 ml to 10.00 ml

Ten pesos (P10.00)

10.01 ml to 20.00 ml

Twenty pesos (P20.00)

20.01 ml to 30.00 ml

Thirty pesos (P30.00)

30.01 ml to 40.00 ml

Forty pesos (P40.00)

40.01 ml to 50.00 ml

Fifty pesos (P50.00)

More than 50.00 ml Fifty pesos (P50.00) plus Ten pesos

(P10.00) for every additional 10.00 ml] |

“(1) NICOTINE SALT OR SALT NICOTINE - THERE SHALL
BE LEVIED, ASSESSED AND COLLECTED ON ANY LIQUID
SUBSTANCE REGARDLESS OF NICOTINE CONTENT,
INCLUDING NICOTINE-FREE LIQUIDS OR ANY SIMILAR
PRODUCT USED IN ANY OF THE DEVICES LISTED IN
SUBSECTION 150(D) OF THIS ACT, FURTHER CLASSIFIED AS
NICOTINE SALT OR SALT NICOTINE AN EXCISE TAX BASED ON
THE FOLLOWING SCHEDULES:

EFFECTIVE ON JANUARY 1, 2020, FORTY-FIVE (P45.00)
PER MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2021, FIFTY PESOS (P50.00)
PER MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2022, FIFTY-FIVE PESOS
(P55.00) PER MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2023, SIXTY PESOS (P60.00)
PER MILLILITER OR A FRACTION THEREOF;

[‘(2)] PROVIDED THAT t{T]he rates of tax imposed under this
Subsection shall be increased by five percent (5%) every year
effective on January 1, 202[1]4, through revenue regulations issued
by the Secretary of Finance.

16


“(2) CONVENTIONAL “FREEBASE” OR “CLASSIC”
NICOTINE - THERE SHALL BE LEVIED, ASSESSED AND
COLLECTED ON ANY LIQUID SUBSTANCE, REGARDLESS OF
NICOTINE CONTENT, INCLUDING NICOTINE-FREE LIQUID OR
ANY SIMILAR PRODUCT USED IN ANY OF THE DEVICES LISTED
IN SUBSECTION 150 (D) OF THIS ACT, FURTHER CLASSIFIED
AS CONVENTIONAL “FREEBASE” OR “CLASSIC” NICOTINE AN
EXCISE TAX BASED ON THE FOLLOWING SCHEDULES:

EFFECTIVE ON JANUARY 1, 2020, FOUR PESOS AND
FIFTY CENTAVOS (P4.50) PER MILLILITER OR A FRACTION
THEREOF;

EFFECTIVE ON JANUARY 1, 2021, FIVE PESOS (P5.00)
PER MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2022, FIVE PESOS AND
FIFTY CENTAVOS (P5.50) PER MILLILITER OR A FRACTION
THEREOF;

EFFECTIVE ON JANUARY 1, 2023, SIX PESOS (P6.00) PER
MILLILITER OR A FRACTION THEREOF;

PROVIDED THAT THE RATES OF TAX IMPOSED UNDER
THIS SUBSECTION SHALL BE INCREASED BY FIVE PERCENT
(8%) EVERY YEAR EFFECTIVE JANUARY 1, 2024, THROUGH
REVENUE REGULATIONS TO BE ISSUED BY THE SECRETARY
OF FINANCE.

“THE MANUFACTURE, IMPORTATION, SALE AND
DISTRIBUTION OF VAPOR PRODUCTS WITH FLAVORING
OTHER THAN PLAIN TOBACCO OR PLAIN MENTHOL, SHALL BE
PROHIBITED.

“Manufacturers, distributors, and importers of vapor products
shall be required to indicate on the package the actual volume in
milliliters of the liquid solutions and gels.

“No vapor products manufactured in the Philippines and
produced for the export shall be removed from their place of
manufacture or exported without posting of an export bond
equivalent to the amount of customs duty, excise and value-added
taxes due thereon if sold domestically.

Provided, however, That vapor products for export may be
transferred from the place of manufacture to a bonded facility, upon
posting of a transfer bond prior to export.

“Vapor products imported into the Philippines and destined
for foreign countries shall not be allowed entry without posting a
bond equivalent to the amount of customs duty, excise and value-
added taxes due thereon if sold domestically.

“Manufacturers, distributors, and importers of vapor 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

7


particular brand of vapor products sold for the three-month period
immediately preceding.

“Any manufacturer, distributor, or importer who, in violation
of this Section, misdeclares or misrepresents in his/her or its sworn
statement herein required 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/her or its permit to engage in business as manufacturer,
distributor, or importer of vapor products.

“Any corporation, association or partnership liable for any 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.

“SELLING OF VAPOR PRODUCTS AT A PRICE LOWER
THAN THE COMBINED EXCISE AND VALUE-ADDED TAXES
IMPOSED UNDER THE LAW SHALL BE PROHIBITED. THE
SELLER OF SUCH PRODUCTS SHALL BE PUNISHED WITH A
FINE OF NOT LESS THAN TEN (10) TIMES THE AMOUNT OF
EXCISE PLUS VALUE-ADDED TAXES DUE BUT NOT LESS THAN
TWO HUNDRED THOUSAND PESOS (P200,000.00) NOR MORE
THAN FIVE HUNDRED THOUSAND PESOS (500,000.00), AND
IMPRISONMENT OF NOT LESS THAN FOUR (4) YEARS BUT NOT
MORE THAN SIX (6) YEARS.

“THE BUREAU OF INTERNAL REVENUE IS MANDATED TO
ISSUE A REVENUE REGULATION PRESCRIBING THE FLOOR
PRICE OR THE MINIMUM PRICE OF VAPOR PRODUCTS TAKING
INTO ACCOUNT THE SUM OF THE EXCISE AND VALUE-ADDED
TAXES AS PROVIDED HEREIN.

“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/she shall
be deported immediately after serving the sentence, without further
proceedings for deportation.

“The sale and distribution, or transfer of vapor products by
any person to minors; purchasing, or otherwise receiving vapor
products from a minor; and the sale, purchase, and use of vapor
products by minors, shall be prohibited. ‘Minor’ refers to any person
below eighteen (18) years old.

Any violation of this provision shall be punishable with the
same penalties provided for in Republic Act No. 9211, otherwise
known as the “Tobacco Regulation Act of 2003’,

“It shall not be a defense for the person selling or distributing
that he/she did not know or was not aware of the real age of the

18


minor. Neither shall it be a defense that he/she did not know nor
had any reason to believe that the product was for the consumption
of the minor to whom it was sold. .

“Unit packets and any outside wrapping of vapor products
and other similar products shall carry a health warning compliant
with Republic Act No. 10643, otherwise known as “The Graphic
Health Warnings Law.”

“Manufacturers and importers are given a period of one (1)
year from the effectivity of this Act to comply therewith.

“Eighteen (18) months after the effectivity of this Act, no
person or legal entity shall sell or commercially distribute or display
any vapor product without ensuring that the labels and packages,
as well as any other container used in displaying the said products
meet the requirements under this Act.

“Any violation of the foregoing provisions on health warning
shall be punishable with the same penalties provided for in Republic
Act No. 10643, otherwise known as “The Graphic Health Warnings
Law’.

“Notwithstanding the provisions of this Act on heated tobacco
products and vapor products, this Act acknowledges the need for
further scientific evidence on the health impact of these products.

SECTION 3. Section 147 of the National Internal Revenue code of 1997, as
amended, is hereby further amended to read as follows:

“SEC. 147. Definition of Terms. - x x x.
XXX
() ‘Vapor products’ shall mean any liquid solution or gel which
contains nicotine that transforms into an aerosol without
combustion through the employment of a mechanical heating
element, battery or circuit that can be used to heat such solution or
gel, and includes but is not limited to, a cartridge, a tank, and the
device without a cartridge or tank. It is commonly known as ‘e-
liquids’ for ‘e-cigarettes.’ IT INCLUDES NICOTINE SALT/SALT
NICOTINE, AND CONVENTIONAL “FREEBASE” OR “CLASSIC”
NICOTINE, AND OTHER SIMILAR PRODUCTS. It also includes
electronic nicotine and non-nicotine delivery _ systems
(ENDS/ENNDS) which are combinations of non-tobacco containing
e-liquids or refills which contain up to sixty-five milligrams per
milliliter (65mg/ml) of nicotine in the e-liquid or refill and an
electronic delivery device to produce an aerosol, mist or vapor that
users inhale by mimicking the act of smoking.”

F(1) THE TERM “SALT NICOTINE” OR “NICOTINE SALT”
SHALL REFER TO LIQUID SUBSTANCES COMPATIBLE FOR USE

19


WITH LOW-WATTAGE DEVICES UNDER SECTION 150(D) OF
THIS ACT, WITH A LOWER ALKALINITY DUE TO THE ADDITION
OF SUBSTANCES SUCH AS BENZOIC ACID, OR OTHER SIMILAR
SUBSTANCES.

F(2) THE TERM “CONVENTIONAL “FREEBASE” OR
“CLASSIC” NICOTINE” SHALL REFER TO LIQUID SUBSTANCES
COMPATIBLE FOR USE WITH DEVICES UNDER SECTION 150(D)
OF THIS ACT NOT FALLING UNDER THE DEFINITION OF “SALT
NICOTINE” OR “NICOTINE SALT.”

SECTION 4. Section 150 of the NIRC, as amended, is hereby amended to
read as follows: .

SEC. 150. Non-essential Goods. - There shall be levied,
assessed and collected a tax equivalent to twenty-percent (20%)
based on the wholesale price or the value of importation used by the
Bureau of Customs in determining tariff and customs duties, net of
excise tax and value-added tax, of the following goods:

xxx

(c) Yachts and other vessels intended for pleasure or sports;
AND [.]

(D) TOBACCO HEATING SYSTEMS AND ELECTRONIC OR
MECHANICAL CIGARETTE DEVICES, WHICH INCLUDE BUT ARE
NOT LIMITED TO ELECTRONIC AND/OR NON-ELECTRONIC
NICOTINE DELIVERY SYSTEMS, E-CIGARETTES, VAPES,
VAPORIZERS, VAPING SYSTEMS, TANK SYSTEM, MODS, AND E-
HOOKAHS, OR ANY SIMILAR PRODUCT, AS MAY BE
DETERMINED BY REVENUE REGULATION, AND ANY
MANDATORY COMPONENT THEREOF EXCLUDING BATTERIES,
CHARGERS, AND CHARGING CABLES WHEN SOLD
SEPARATELY. HOWEVER, IF BATTERIES, CHARGERS,
CHARGING CORDS, AND OTHER ACCESSORIES ARE SOLD OR
PACKAGED TOGETHER WITH A TOBACCO HEATING OR
ELECTRONIC OR MECHANICAL CIGARETTE DEVICE AS ONE
SALEABLE ITEM, THE VALUE THEREOF SHALL FORM PART OF
THE WHOLESALE PRICE OR THE VALUE OF IMPORTATION.

SECTION 5. IMPLEMENTING RULES AND REGULATIONS. — The
Secretary of Finance shall, upon the recommendation of the Commissioner of
the Bureau of Internal Revenue, promulgate the necessary rules and
regulations for the effective implementation of this Act.

20


SECTION 6. 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.

SECTION 7. EFFECTIVITY. - This Act shall take effect upon its
publication either in the Official Gazette or in a newspaper of general circulation.

Approved.

a