Consumer groups wary of vape tax loophole
MANILA, Philippines — Consumer groups have urged Congress to scrap what they described as a “glaring loophole” in the country’s vape excise tax system.
In a news release, CitizenWatch Philippines and Progreso Para sa Bayan warned that the current distinction between nicotine salt and freebase nicotine allows unscrupulous operators to misdeclare products, evade taxes, and rob the government of much-needed revenues.
Under the current 2026 tax structure, a 10 mL nicotine salt vape is taxed at P602, while a similar-sized freebase product is taxed at only P69.46. The result is a P532.54 tax difference per 10 mL, with the tax on nicotine salt products nearly nine times as high as that imposed on freebase products. The groups said this disparity creates a strong incentive for misdeclaration and complicates tax enforcement.
The groups issued the statement following the August 11 hearing of the House Committee on Ways and Means on several bills seeking to amend excise taxes on tobacco and vapor products.
House Ways and Means Committee Chair Rep. Miro Quimbo warned that the disconnect between rising consumption and declining collections points to a growing illicit market.
“More than 10 percent ang nawala sa taon na ito. Obviously, nakakaalarma siya kasi nakita natin sa data na ang consumption ng sigarilyo o ng tobacco ay umaakyat, pero ang collection naman ay bumababa. So ibig sabihin mas maraming mga tobacco products ang illegal, smuggled o hindi nagbabayad ng buwis,” Quimbo said.
CitizenWatch convenor Orlando Oxales said the problem is not merely weak enforcement, but also a tax system that has become increasingly vulnerable to manipulation.
“When two products look the same, are sold the same way, and are used the same way, but are taxed differently based on a characteristic that regulators cannot easily verify on the spot, misdeclaration becomes a business opportunity,” Oxales said.
Several measures pending before the committee propose replacing the current two-tier tax structure with a single excise tax rate for vapor products regardless of nicotine formulation. The bills cite mislabeling and misdeclaration as risks created by the existing framework.
Marc Gamboa, convenor of Progreso Para sa Bayan, said simpler rules would allow regulators to focus their resources on actual enforcement.
“Every minute spent determining whether a product contains nicotine salt or freebase nicotine is time that could instead be spent pursuing actual tax evaders,” Gamboa said. “Illicit operators thrive on regulatory complexity. The simpler the rules, the harder they are to exploit.”
He noted that the Philippines is unusual internationally in maintaining a tax distinction specifically between nicotine salt and freebase formulations, a system that he said complicates compliance and creates potential loopholes for illicit operators.
The Bureau of Internal Revenue, Bureau of Customs, and Department of Trade and Industry have likewise expressed support for a unified vape tax rate, citing enforcement difficulties and potential revenue leakage under the current setup.
“The government should be collecting taxes, not guessing what is inside a vape cartridge,” Oxales said. “The more complicated the rules, the easier they are to abuse. A tax system should help enforcement, not create opportunities for illicit operators.”
The groups stressed that simplifying the tax structure does not necessarily mean abandoning the principle that different product categories may warrant different tax treatment. They said Congress should arrive at a system that is simple to administer, difficult to manipulate, and consistent with broader fiscal and regulatory objectives. (Contributed story)
- Latest
- Trending
