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Tax Gap of Heated Tobacco Products in the Philippines

As of mid-2020, no company had officially introduced a heated tobacco product in the Philippines, however Philip Morris International announced that it intends to launch IQOS in 2020. Until 2019, consumption of heated tobacco was essentially just imported products. In 2019, the tax code was amended to introduce a new tax category for heated tobacco (RA 11346), and the tax system and rates were approved in Jan 2020 (RA 11467). Effective January 1, 2020, the rate is PHP 25.0 per pack of 20 sticks. This is set to increase to PHP 27.5 per pack of 20 sticks in 2021, PHP 30 per pack of 20 sticks in 2022, PHP 32.5 per pack of 20 sticks in 2023, PHP 34.13 per pack of 20 sticks in 2024, and 5% annually thereafter. 

The Philippines applies a pure specific excise tax system to cigarettes. The current specific excise tax rate is PHP 45 per pack of 20 sticks, which is set to increase to PHP 50 per pack of 20 sticks in 2021, PHP 55 per pack of 20 sticks in 2022, and PHP 60 per pack of 20 sticks in 2023.

This implies that the excise rate on heated tobacco products will annually increase by PHP 2.5 per pack, half the size of the increase in the excise rate on cigarettes and e-cigarettes will annually increase by (PHP5), until 1st January 2024.

Sources

 Last Updated Feb. 24, 2021