The Market Monitor Minding the Nation's Business
Two key measures regulating tax increases on cigarettes and strengthening excise tax administration to combat illicit trade and minimize revenue losses have been sent by the House of Representatives to the Senate.
House Bills 11360 and 11286 have been approved by the lower chamber on third and final reading, signaling a major step in refining tax policies on tobacco products.
HB 11360 introduces amendments to the National Internal Revenue Code of 1997, particularly Sections 144, 145, 147, 263-A, and 289 which increased by two percent every even-numbered year, effective January 1, 2026 the excise tax on tobacco, heated tobacco, cigarettes and vapor products and by four percent every odd-numbered year, effective January 1, 2027 untl December 31, 2035.
It also sets an excise tax rate of P41 per pack of 20 units or packaging combinations of not more than 20 units for heated tobacco products.
It also imposes a unitary tax rate of P66.15 per milliliter on vapor products covering all liquid substances including nicotine free options and adjusts the excise tax rate on cigarettes packed by hand or machine to P66.15 per pack.
The bill directs the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) to establish removal thresholds to prevent frontloading.
The measure authorizes the president, upon recommendation of the Secretary of Finance, to increase tax rates by up to 5 percent if the national deficit surpasses the programmed deficit by 2 percent.
The bill mandates conducting a 10-year review of the tax policy’s impact on revenue, health costs, and smoking prevalence. It also instructs the BIR to set a floor price for cigarettes, ensuring consideration of applicable taxes, production costs, and trade margins.
Allocate special financial support to Virginia tobacco-producing provinces for infrastructure projects such as multipurpose buildings and flood control systems; cash and educational assistance for tobacco farmers, alternative crop planters, fisherfolk, and their children; and medical and educational facility support for hospitals and schools.
HB 11286 introduces a mandatory tracking and tracing system requiring the use of secure digital markers with unique identifier features on tobacco products. Additionally, it defines the crime of illicit trade of covered products and imposes commensurate penalties for such offenses.
Manufacturers will be required to register their tobacco product manufacturing equipment within 30 days from acquisition or disposal.
Digital platforms are also mandated to ensure the absence of illicit covered products on their respective platforms.
The BIR, through the National Telecommunications Commission, will be granted the authority to remove illicit product listings from digital platforms.
The bill further outlines the procedure for custody and disposition of confiscated, seized, or surrendered covered products to ensure a proper chain of custody.
To strengthen enforcement, the bill establishes an Inter-Agency Tobacco Illicit Trade Council, to be chaired by the DOF, which will implement appropriate measures to suppress the illicit trade of covered products.