Rizal Ceremonial Hall, Malacañan Palace
20 December 2012

President Benigno S. Aquino III signed Republic Act 10351 (An Act Restructuring the Excise Tax on Alcohol and Tobacco) or the Sin Tax Reform 2012 in Malacañang.

Considered as the only tax reform on alcohol and tobacco products that favours the Government and the Filipino people, the Sin Tax Reform Act will generate funding for the government’s universal healthcare program and additional funding for tobacco farmers’ livelihood support.

In his speech, President Aquino thanked leaders of the House and Senate Committees on Ways and Means for what he calls an early Christmas gift for the Filipino people.

“Maraming nag-isip na imposibleng maipasa ang Sin Tax Reform Bill: malakas ang kalaban; maingay, organisado, at malalim ang bulsa ng mga kumukontra. Pero gaya po ng paulit-ulit nating napatunayan: Walang imposible sa Pilipinong sumasagwan,” the President said.

The Sin Tax Reform Law will remove the price/brand classification freeze and the proper tax classification of alcohol and tobacco products will be determined every two (2) years. There will also be a gradual shift to a unitary taxation in order to simplify the current multi-tiered structure, prevent downshifting to lower-priced brands, discourage consumption of sin products and for easy tax administration.

To prevent the excise taxes to be eroded by inflation, the excise tax rates will be increased by 4% every year effective 2016 for distilled spirits, and 2018 for cigarettes and beer.

The sin tax reform adheres to World Health Organization-Framework Convention on Tobacco Control commitment on cigarettes and the World Trade Organization’s ruling on distilled spirits.

On the first year of implementation, the government is expected to raise additional revenues worth P33.96 billion, of which, P23.4 billion is from cigarettes, P6.06 billion from distilled spirits and P4.5 billion from fermented liquors.

The newly signed bill will take effect on January 1, 2013.