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Salceda on low vape tax revenues: “Double-whammy” of smuggling and tax evasion; House tax chair warns industry to “pay up” with government “before public opinion blows up in their face”

November 21st, 2022

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) is calling on the vape industry to become more diligent in paying their taxes “before public industry blows up in their face” as the House tax panel’s hearing today revealed that the government is collecting far fewer revenues than expected out of the industry given its market size in the country.

Salceda, who is principal author of House Bill No. 5532, which seeks to increase taxes on vape products by around 14%, and levy an additional tax on vaping devices, says that the industry must cooperate with government before public opinion shifts towards tighter regulation of the products.

“They asked for looser regulations, through the Vape Regulation Law, which supplanted many of the stricter conditions under the Tax Code. Tapos hindi pala sila magbabayad ng buwis. Pay up, before this blows up in your face,” Salceda said.

The Bureau of Internal Revenue has collected only P242 million in excise taxes from heated tobacco products and just P7 million from vape in 2021. Meanwhile, data submissions from the Bureau of Customs included VAT and duties but not excise taxes.

“Market data suggests that the country’s vape market is generating as much as P12.3 billion in sales. In 2019, when the Vape Tax Law was being discussed, government revenue agencies projected as much as P1.4 billion in tax revenues annually from the measure. In short, we are off target in taxes, while sales projections seem to be on track.”

“Lackluster revenue performance from both customs and BIR indicates the possibility of both smuggling and tax evasion going on. So, it’s a double-whammy for vape, as far as taxes are concerned.”

Salceda also cited WHO recommendations which suggest that stronger measures for taxing and regulating vape products should be in place.

Salceda also directed the Department of Finance “to conduct further studies on elasticity and consumption impact.”

Salceda also directed the creation of a technical working group chaired by Senior Vice Chair Mikaela Suansing and Representatives Ria Vergara, Kristine Singson-Meehan, Robert Ace Barbers, and Keith Flores-Reyes, as members.  The technical working group will write the draft committee report for the measure.

Salceda cited possible lack of enforcement measures on electronic sales of vape products. Salceda says he has already been in talks with electronic commerce platforms and directed the technical working group to study this angle further.

“Use the resources of the committee as you deem fit,” Salceda told members of the technical working group.

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