Have you ever wondered why certain products—like gasoline, cigarettes, or alcoholic drinks—are significantly more expensive than others? One major reason is excise tax. In the Philippines, excise tax is imposed on specific goods to generate revenue and regulate consumption.
In this article, we’ll explain what excise tax is, what products are affected, how it’s calculated, and how it ultimately impacts businesses and consumers.
What is Excise Tax?
Excise Tax is a type of tax levied on specific goods that are either:
Manufactured or produced in the Philippines, or
Imported into the country
Unlike VAT, which is applied to all goods and services, excise tax applies only to select products, often those considered non-essential, harmful to health, or luxury items.
Excise tax is either:
Specific – based on quantity (e.g., per liter, per pack)
Ad valorem – based on selling price or value
Purpose of Excise Tax
Revenue generation
Discourage consumption of harmful goods (e.g., cigarettes, sugary drinks)
Promote environmental goals (e.g., taxing fuel to reduce emissions)
Encourage healthier or more sustainable alternatives
Products Subject to Excise Tax in the Philippines
Here’s a breakdown of some common products affected by excise tax:
Tobacco Products
Excise tax on cigarettes and other tobacco products has significantly increased due to the Sin Tax Law (RA 10351, RA 11346, and RA 11467).
Cigarettes (per pack): ₱60 in 2023, increasing by ₱5 annually
Heated tobacco products & vapes: Also taxed, rates depend on type and nicotine content
Goal: Discourage smoking, raise funds for healthcare programs
Alcoholic Beverages
Includes beer, wine, and distilled spirits:
| Product | Tax Type | Rate |
|---|---|---|
| Beer | Specific | ₱35+ per liter (increasing annually) |
| Wine | Specific | ₱50+ per liter |
| Distilled Spirits | Ad valorem + Specific | 22% of value + ₱50/liter |
Goal: Regulate alcohol consumption and generate sin tax revenue
Petroleum Products
Fuel prices are significantly impacted by excise taxes:
| Fuel Type | Rate |
|---|---|
| Diesel | ₱6.00/liter |
| Gasoline | ₱10.00/liter |
| Kerosene | ₱5.00/liter |
| LPG | ₱3.00/kilo |
This is governed by the TRAIN Law, which introduced a gradual increase in rates from 2018 onwards.
Goal: Raise infrastructure funds and encourage cleaner energy use
Sugar-Sweetened Beverages
Applies to soft drinks, energy drinks, and other sweetened beverages:
₱6/liter for drinks with caloric or non-caloric sweeteners
₱12/liter if using high-fructose corn syrup (HFCS)
Goal: Reduce sugar consumption and fight obesity & diabetes
Automobiles and Luxury Goods
Excise tax on cars: Based on vehicle’s net price (ad valorem, 4%–50%)
Luxury items: Jewelry, yachts, perfumes, etc., also subject to ad valorem taxes
Goal: Tax high-value consumption and fund government programs
Who Pays Excise Tax?
Manufacturers and importers are the primary taxpayers
Consumers indirectly pay because excise tax is included in the retail price
For example, a ₱100 pack of cigarettes includes around ₱60 in excise tax.
How It Affects Businesses and Consumers
For Businesses:
Higher product prices may reduce sales
Must comply with excise tax filing and payment schedules
Required to issue proper invoices reflecting excise taxes
For Consumers:
Products become more expensive
May drive shifts in consumer behavior (e.g., switching from soda to water)
Filing and Compliance
Businesses dealing with excisable goods must:
Register with the BIR as a manufacturer or importer
File monthly/quarterly excise tax returns (e.g., BIR Form 2200 series)
Use BIR-prescribed forms and stamps (for alcohol, tobacco)
Pay excise tax before removal from production or customs
Penalties for Non-Compliance
Failure to pay excise tax may result in:
Fines
Business closure
Seizure of goods
Criminal charges for tax evasion
Final Thoughts
Excise tax plays a critical role in shaping consumer habits, protecting public health, and funding government programs. Whether you’re a business owner selling excisable goods or a consumer buying them, understanding how excise tax works helps you make more informed decisions.
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