Philippine Congress Passes Bill on Tobacco and E-cigarette Tax Adjustments

According to the Philippine News Agency (PNA) report on February 4th, a bill on rationalizing the tax rates for tobacco and e-cigarette products was passed during final deliberations in the House of Representatives.

In a full assembly meeting on Monday evening, February 3, the House of Representatives passed the third reading of Bill No. 11360 with 190 votes in favor and 4 votes against. The bill aims to increase structured tax rates on tobacco products by amending the National Internal Revenue Code.

According to the law, starting from January 1, 2026, the consumption tax rate will increase by 2% every even-numbered year, and from January 1, 2027 to December 31, 2035, it will increase by 4% every odd-numbered year. Heating tobacco products will be taxed at 41 pesos (0.7 USD) per pack, while the tax rate for cigarettes and e-cigarette products will be 66.15 pesos (1 USD) per pack. The Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) will set removal thresholds to prevent early hoarding.

The bill also grants the president the authority to raise tax rates by up to 5% if the national fiscal deficit exceeds the target by 2%. The impact of the tax rates on government revenue, healthcare costs, and smoking rates will be reviewed ten years after implementation.

In addition, the House of Representatives passed Bill No. 11286 regarding a tobacco product tracking system with a vote of 177 in favor and 4 against. The bill requires the establishment of a tobacco product tracking system to enhance the enforcement of consumption taxes.

This measure requires all tobacco products to be accompanied by a unique identifier safety digital marking, and mandates that tobacco manufacturing equipment must be registered within 30 days of purchase or disposal.

The bill defines the illegal sale of cigarettes, cigars, heated tobacco, e-cigarettes, and new tobacco products, and imposes harsher penalties on offenders. The National Tax Bureau will collaborate with the National Telecommunications Commission to have the authority to remove illegal product listings from digital platforms. Online platforms must ensure that there are no illegal tobacco products on their websites. The bill also establishes a cross-agency committee led by the Ministry of Finance to implement measures to combat the illegal tobacco trade.