March 19th, 2024
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) lauded the decision of the Department of Trade and Industry (DTI) on Monday to suspend the operations of the electronic cigarette brand FLAVA, following a series of raids which found billions in smuggled vapes carrying the brand. Salceda presided over a series of meetings of the House Committee on Ways and Means on the issue.
“I am very pleased with the DTI’s move to shut FLAVA down. We are already looking at a minimum of P9.3 billion in smuggled goods and evaded taxes by this company. And looking at the proliferation of its goods in local markets, there is more to be uncovered,” Salceda said.
“So, I strongly urge the Bureau of Customs to keep on doing raids. There is probably more in warehouses,” Salceda added.
Salceda says that as a result of the proliferation of electronic cigarettes that do not pay the corresponding excise taxes and duties, government collections from tobacco excise taxes went down from a peak of P176 billion in 2021 to just P142 billion in 2023.
“And the decline will continue as more people shift from the taxed cigarettes to the untaxed. Make no mistake, that’s a threat to everyone, because Universal Health Care derives funding from tobacco excise taxes.”
“Policy-wise, I want to eliminate the distinctions between freebase and nicotine salt, because the differential in rates has also been abused. For a 10mL pod, the tax on free base is P60, but P520 for salt nic. FLAVA has been labeling its goods as freebase, when independent testing finds it appears to be nicotine salt.”
“We also want to the de minimis value of P10,000 absolutely not applicable on excisable goods,” Salceda added.
“Reducing the de minimis value to around P3000, the regional average, is also an option given the massive tax leakage from electronic commerce.”
Earlier during the year, the House tax panel held a series of hearings recommending the closure of FLAVA and the filing of cases against its officers. The resolution urging the Committee to conduct hearings was authored by Rep. Rufus Rodriguez.