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After deducting the allocations for assistance to tobacco farmers under existing laws R.A. 7171 and R.A. 8240, eighty percent (80%) of the remaining balance of the incremental revenue will be earmarked for the universal health care under the National Health Insurance Program and twenty percent (20%) will be allocated nationwide for medical assistance and health enhancement facilities program.
The law provides additional funding for tobacco farmers’ livelihood program.
The Sin Tax Reform law paves the way for the removal of the price/brand classification freeze. The proper tax classification of alcohol and tobacco products will be determined every two (2) years.
With the crafting of the law, there will be gradual shift to a unitary taxation in order to simplify the current multi-tiered structure.
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 conforms to the World Trade Organization’s ruling on distilled spirits and World Health Organization- Framework Convention on Tobacco Control’ commitment on cigarettes. The excise tax incidence for cigarettes, which is the ratio of excise tax to price, will increase from the current 29.1% to 52.5% in 2013 and 63% by 2017.
The law also aims to generate more revenues for the government. 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 cigarrettes, P6.06 billion from distilled spirits and P4.5 billion from fermented liquors.
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