By Filane Mikee Cervantes

‘REAL IMPACT’. Department of Trade and Industry Undersecretary Ruth Castelo and personnel of the Bureau of Internal Revenue inspect a vape shop along Maceda Street in Manila in this June 19, 2023 photo. During the hearing of the House of Representatives Ways and Means Committee on Tuesday (Dec. 12, 2023), Albay Rep. Joey Salceda said the “substitution effect” from tobacco to e-cigarettes is having a “real impact” on tobacco excise tax collections. (PNA photo by Yancy Lim)

MANILA – A leader of the House of Representatives said Tuesday that tobacco excise tax revenues are likely to continue to decline as the e-cigarette sector takes a bigger share of the market.

During the hearing of the House Ways and Means Committee, panel chair, Albay Rep. Joey Salceda, said the “substitution effect” from tobacco to e-cigarettes is having a “real impact” on tobacco excise tax collections.

Salceda noted that the Bureau of Internal Revenue (BIR) expects a decline of at least 11 percent in excise tax collection this year.

“Statista projects e-cigarette sector to be PHP13.244 billion in size. Using just freebase rates and average prices, the industry should be paying at least PHP5.56 billion,” he said.

He pointed out that vapes offer more “value-for-money” in terms of puffs, hence the shift, with 10,000 puffs for each e-cigarette pack with the price of PHP490 compared to 300 puffs for each cigarette pack priced at PHP125.

Vape sale is not yet particularly classified as an industry of its own under the Philippine Standard Industrial Classification, Salceda said, suggesting that the PSIC should classify the manufacture and sale of electronic cigarettes as a separate industry class to improve monitoring.

In the same hearing, he lauded the Bureau of Customs led by Commissioner Bienvenido Rubio for the actions it has taken to fight illicit trade in electronic cigarettes, as the bureau presented its findings on the 1.4 million electronic cigarettes found in a Valenzuela warehouse that were allegedly smuggled.

The stocks, marked “Manufactured by Flava Corporation,” are suspected to have evaded PHP728 million in excise taxes and PHP84 million in value-added tax.

“The report of the Bureau of Customs is complete, concise, and actionable. I would like to congratulate Commissioner Rubio, Assistant Commissioner Vincent Philip Maronilla, and the staff in charge of the entire process for the way they handled this,” Salceda said. “This was extremely professional and BOC took very sensible measures.”

As a countermeasure, he proposed that the BIR should “faithfully” implement the rule on having a Revenue Office on Premise (ROOP) for electronic cigarette manufacturers.

“The place of business of FLAVA did not have a Revenue Office on Premise assigned to it,” Salceda said.

He further noted that the contradictions in the BIR system of registration of e-cigarette companies should be resolved.

The distinction between manufacturers, importers, wholesalers, and retailers is crucial because it should determine the extent of responsibility for ensuring excise tax payment, he said.

Salceda also proposed that third-party liability should be established.

He explained that the rules and regulations issued on the implementation of the Vape Tax Law and the Vape Regulation Act “do not outline the responsibility of foreign supplier to label and declare the shipment as electronic cigarettes, those of brokers, logistics providers, and online selling platforms.”

He said the definition of salt nicotine or freebase should be clearly set out.

“Excisable products should also be declared from the port of departure,” Salceda said. (PNA)