Cheyenne Suarez

An individual is photograph vaping an electronic cigarette in Quezon City on May 31, 2024. In a recent regional conference of the Southeast Asia Tobacco Control Alliance (SEATCA) in Bangkok, Thailand, World Health Organizatio (WHO) urged the youth must lead the charge in calling out the tobacco industry for its manipulative and deceptive tactics, which create devastating impact on health, social justice, and the environment. Maria Tan, ABS-CBN News

Article (news)

20240531-vape-smoking-MT-1.jpg

Victoria Tulad

ABS-CBN News

MANILA - The government’s excise tax collection has dropped due to illicit trade and change in consumption pattern of smokers.This was confirmed by the Bureau of Internal Revenue (BIR) during the hearing of the Senate Committee on Ways and Means on Thursday, which zeroed in on illicit trade on excisable products.Excisable products, according to Committee Chair Senator Sherwin Gatchalian, include alcohol, petroleum, tobacco and vapor products, automobiles, non-essential services like invasive cosmetic procedure and body enhancements, non-essential goods such as jewelry, sugar sweetened beverage, and mineral products.“One of the reasons why decrease is the change in consumption pattern of those smokers from using traditional tobacco or cigarette to vape. This was shown in survey conducted by FNRI. And another one is, of course, illicit trade,” Dondanon Galera of BIR’s Excise Large Taxpayers Service Office said.According to Galera, the collection started dropping in 2021. From P176.48 billion that year, the collection decreased to P134 billion in 2024.From January to September 2024, BIR has conducted 141 enforcement activities against illegal vapor products. This significantly increased to 847 from October to November of the same year because BIR also conducted visitation of retailers of vapor products.“2024 raids increased five fold. Is this indication illicit trading is flourishing?” Gatchalian asked.“Yes,” Galera said. “They even use online platforms.”<div>GOVERNMENT LOSSES</div>Based on data mentioned by Gatchalian, tax leakages from illegal cigarettes amounted to P342 million in 2024, while leakages from vapor products amounted to P64 million.The Department of Finance (DOF) and Bureau of Customs (BOC) confirmed the proliferation of illegal trade.BOC Assistant Commissioner Vincent Maronilla said from 131 seizures in 2021 amounting to P1.71 billion, their seizures increased to 318 in 2024 with estimated value of P9.19 billion.The DOF, however, does not yet have a computation on how much the government is losing in revenue.Based on their figures, Gijs De Best, President of Philip Morris Fortune Tobacco Co. (PMFTC) said the Philippine government lost more than P50 billion in 2024 due to illicit trade and a combined P190 billion in the last four years.He said one illegal pack of cigarettes, for example, is being sold at P50 pesos as compared to a legal pack of P140 pesos.“You can imagine how appealing these products are,” De Best said.He appealed for changes to address the problem.“We need a level playing field where all the industry participants are paying the right tax and are complying with all laws and regulations. Hence, we request this administration for consistent nationwide enforcement of all related laws and regulations such as tax code vape law and the recently passed Anti-Agri Economic Sabotage Act. And this also includes prosecution of illicit traders and bringing them to court,” De Best stated.  According to Philippine Tobacco Institute (PTI) President Jericho Nograles, the government is losing P52 billion from the smuggling of vape and tobacco products.  Gatchalian told DOF to look into the matter and come up with solutions.“The DOF should press the alarm button. In the last two years, the number of raids and seizures have been going up, quantity and value is going up. If we don’t focus our attention on this, we might end up, illicit trade might be bigger than legal activities,” Gatchalian said.Based on data from the Department of Health (DOH), smoking prevalence from 2021 to 2023 went up from 21 percent to 24 percent, respectively, which puzzled Gatchalian.“You have 2 to 3 million new smokers whether it’s vape or smoking illicit products,” Gatchalian said.“Revenue is going down but smoking prevalence is going up,” he added. “Where is smoking coming from?”DOH Undersecretary Kenneth Ronquillo said they do not have a study yet but committed to doing one.Due to lower excise tax collection, Ronquillo said health initiatives will be affected. Fifty percent of the collection goes to various health programs. Eighty percent of this 50% goes to Philhealth, while the 20 percent is allocated nationwide.“Health outcomes will not be as good as we have,” Ronquillo warned.

Excise tax collections started dropping in 2021. From P176.48 billion that year, the collection decreased to P134 billion in 2024.

Excise tax collections started dropping in 2021. From P176.48 billion that year, the collection decreased to P134 billion in 2024.

Government losing billions in excise tax collections from illicit trade

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Government losing billions in excise tax collections from illicit trade

Victoria Tulad,

ABS-CBN News

Published January 09, 2025 05:40 PM PHT

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excise tax

illicit trade

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