November 10th, 2023
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that the House tax panel will investigate the e-cigarette label FLAVA for possible tax evasion and tax fraud after a warehouse with illegally imported e-cigarettes bearing the label was raided on October 27. The raid yielded a value of P1.43 billion, with what Salceda estimates to be as much as P728 million in evaded excise taxes.
“We will investigate the matter as soon as possible, to see the extent of the fraud and tax evasion. If this is just one warehouse, imagine how much the value of evaded excise taxes must have been over its entire operations.”
The October 27 raid produced some 1.4 million pieces of 10mL disposable vape pods.
Salceda adds that it appears that the label has also been misdeclaring its products as freebase vape rather than salt nicotine, as the latter is taxed at a higher rate.
Under Republic Act No. 11467, salt nicotine vape is taxed at P52 per milliliter, while freebase is taxed at P60 per 10 mL.
“We have received reports of independent testing which appears to confirm that one of FLAVA’s products, Chillax, contains high concentrations of nicotine salts. If that is the case, then they have been paying just about one-tenth of what they should be paying in excise taxes for those products.”
“We have also been looking into other violations, including brazenly labelling their products to appeal to minors, in complete contravention of the ban against fancy flavoring,” Salceda added.
“We have also been scanning their online presence. Indeed, it appears that there is no attempt at a subdued marketing of its product’s flavors. Among all the prominent vape labels, they appear to have the most egregious attempts at marketing their products to a younger audience.”
“We will also be looking at their BIR registrations. Vape products have tax stamp requirements, and there are allegations that FLAVA has in fact not been compliant.”
“80 percent of revenues from vape sin taxes are spent towards universal health care and government hospitals. So, the health impacts of smoking vapes aside, tax evasion in this product is stealing from our hospitals and our sick.”
“This could be comparable to the Mighty Case. If found liable of excise tax evasion, the excise tax due is subject to a penalty of ten times the amount. That’s under Section 263 of the Tax Code. So, really, on the warehouse raid alone, you could be looking at a penalty of P7.28 billion. Once we factor in all past offenses, the amount could be staggering.”
Salceda, who was already Chair of the House tax committee when RA 11467 or the Vape Tax Law was passed, is also a principal author of the measure.