Vapes push excise tax collection to P135 billion in H1

MANILA, Philippines — Vape products are slowly making significant tax contributions as they push excise tax collection 10 percent higher to P135 billion in the first half following the government’s move to include them in the stamps system.

Data obtained by The STAR showed that excise taxes went up by almost 10 percent to P134.54 billion from January to June compared to last year’s P123 billion.

This was driven by the 34-percent hike in the tobacco excise segment to P58.97 billion from P43.95 billion. In particular, vape products posted a remarkable 738-percent jump in collections to P1.5 billion from only P179 million a year ago.

This developed after the Bureau of Internal Revenue (BIR) took full control of excise tax collections on vape products, imported or domestically produced, through their inclusion in the cigarette stamp system.

“As such, we were able to have regulatory control and monitoring of the product’s taxability. This, coupled with aggressive enforcement activities on illicit products resulted in increases in collection,” BIR assistant commissioner Jethro Sabariaga told The STAR.

Last year, the BIR mandated the fourth generation internal revenue stamps for all imported and locally manufactured vape products.

Lack of internal revenue stamps means non-payment of excise taxes, which would result in the seizure of vape products and the possible filing of tax evasion cases.

The Philippine E-Cigarette Industry Association (PECIA), on the other hand, said the increase in excise collection showed that the Vape Law is working. PECIA is the industry group composed of around 300 manufacturers and distributors of e-cigarettes and vapes in the country.

PECIA president Joey Dulay said the improvement is largely due to improved industry compliance with more players now properly registered, licensed and paying the correct excise taxes.

“Legitimate businesses have shifted away from the informal market and are now operating within the law. Compliance increases, revenue goes up and consumers are better protected,” Dulay told The STAR.

Apart from vapes, almost all items on the tobacco segment posted increases such as cigarettes, cigars and heated tobacco.

Sabariaga said this was likely due to increased consumption of legal or tax paid products and lesser proliferation of illicit whites stemming from the agency’s aggressive enforcements and saturation against contraband tobacco products.

“This is an additional paradigm to tax administration- which before used to focus merely on revenue collection and now toward non-proliferation of illegal products and purging the market of untaxed products,” he said.

The Philippine Tobacco Institute (PTI), for its part, noted that there is a partial recovery of the legal market – likely encouraged by intensified raids and factory closures in areas such as Bulacan, Valenzuela, Butuan and Zamboanga.

PTI president Jericho Nograles said these actions disrupted illicit operations and may have helped redirect volumes back into the formal economy.

Nograles emphasized that sustaining the trend will require continued interagency coordination, consistent enforcement on the ground and timely prosecution of offenders.

“We always advocate for a calibrated and data-driven approach to excise taxation – one that accounts for enforcement realities and the economic impact of tax policy on both government and industry,” Nograles told The STAR.

Meanwhile, data showed that excise on alcohol slipped by three percent to P50.55 billion on lower collection from fermented liquors and distilled spirits.

Combined, tobacco and alcohol products made up 81 percent of total excise tax collection in the first half.

Excise on sweetened beverages decreased by four percent to P18.46 billion, minerals went down by 12 percent to P4.07 billion, automobiles slipped by 15 percent to P2.37 billion and non-essentials declined three percent to P113.65 million.

On the other hand, excise on cosmetics procedures rose by 28 percent to P11.59 million.

Excise tax is a levy on the production, sale or consumption of a commodity. It contributes around 12 percent to the overall collection of the BIR. Excisable products include alcohol, tobacco, petroleum and minerals.