BIR: Illicit trade, vaping drain P6 billion in excise taxes

Some P6 billion in excise taxes from the tobacco industry have been lost so far this year due to illicit trade and shift to electric cigarettes, an official from the Bureau of Internal Revenue (BIR) said.

Venus Gaticales, BIR chief of excise large taxpayers field operations division, told reporters that revenue declined by P6.6 billion from February to April compared to the same period a year ago.

This latest data adds up to the first quarter loss of P5.49 billion or a 20 percent decrease from P27.47 billion to P21.97 billion, based on data from the BIR.

Gaticales said that the drop in excise taxes from tobacco may be attributed shifting of preference for electric cigarettes or vapes.

“There is a shift of preference from using the tobacco to the new tobacco products, which is vape, which is now a fad of the youth, for the youth,” she said on the sidelines of a forum on illicit trade of tobacco products.

“So, the shifting of preference and we would say that the contributions of the excise tax on vapor products, although it almost increased by 100 percent or more, it is not enough to compensate the decrease,” she added.

Tobacco industries contributed 40.16 percent to the total excise tax collections as of April this year, the BIR official said.

Last year, excise taxes on tobacco products dropped by P25.5 billion or 15.91 percent from P160.212 billion to P134.874 billion.

The law mandates that 80 percent of excise taxes from tobacco must be allocated to the Philippine Health Insurance Corporation for the implementation of the Universal Health Care Act while 20 percent to medical assistance and the health facilities improvement program.

Tracking mechanism

Gaticales also said that the BIR is supporting House Bill No. 10329 which requires tobacco companies to register their tobacco machinery and ingredients to the government and introduces a “track-and-trace” for the tobacco value chain.

“Any law that will help us, um, give a stricter regulations or regulations powers po will help because our workforce is not that big enough to cover the entire Philippines,” she said.

Similarly, a tax stamp mechanism for all imported and locally manufactured vape products will be implemented by the BIR starting June 1.

She also said that a QR code will be utilized to determine whether the seizable items are legitimate or not.