Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui Jr. expressed openness to a proposed moratorium on the annual increase in excise taxes on tobacco products, provided that the agency's tax collection targets are revised accordingly.

"One issue that we will be [facing] moving forward if there is ever a moratorium, is the corresponding increase in the excise tax goal on tobacco products,” Lumagui told reporters on the sidelines of the Tobacco International Summit, Jan. 28.

He noted that the BIR's collection target of P3.23 trillion already assumes yearly tax rate increases.

"If a moratorium is implemented, the excise tax goal will need to be adjusted," he asserted.

Congress recently proposed a moratorium on the yearly increase in excise taxes on tobacco and cigarettes, revising the tax rates to two percent for 2026 and four percent for 2027, with these rates continuing alternately until 2035.

Lumagui admitted that this is a policy issue requiring in-depth review. He noted that Congress would likely base its decision on research suggesting that current rates are too high, making illicit trade more lucrative.

“If your excise tax rates are too high, then it’s more lucrative for the illicit traders as well,” the BIR chief argued. He believes revising the rates downward, coupled with more aggressive enforcement, could address problems related to the proposed tax changes.

While Lumagui has no objection to the moratorium, he expressed uncertainty about whether it would increase revenue.

“If you're at that point where the rate is too high, maybe the moratorium is not enough he explained,” Lumagui said. “You have to find that balance.”

Equalizing tax rates for cigarettes,vapes

Lumagui emphasized the need to analyze factors influencing revenue trends.

He pointed out that there have been instances where excise tax increases did not lead to higher tax collections. This suggests that other factors, such as changes in consumer behavior or market conditions, may be at play.

Lawmakers recently highlighted an increase in smoking rates, despite data showing a decrease in tobacco users. This discrepancy may be attributed to the rising popularity of vapes.

Lumagui acknowledged that a decrease in excise tax collection might not be alarming if it's due to a shift towards vaping, which is preferable to losses from illicit trade. To address this, he proposes equalizing tax rates for cigarettes and vapes.

“That’s why I said that the ideal is to prioritize the equalization of the rate of cigarette and vape,” Lumagui asserted. This would ensure balanced collections without requiring a moratorium on cigarette tax rates.

Currently, the Philippines imposes an excise tax of P63 per pack of 20 cigarettes, while vape products are taxed at P109.20 for 2 mL salt nicotine pods and P63 for every 10 mL of classic nicotine products.

Lumagui noted the significant disparity in tax rates, considering that vape products deliver approximately 5,000 to 10,000 puffs per device, compared to 200 puffs in a pack of cigarettes.

He expressed concern about the imbalance in the tax system, where vapes are taxed substantially lower than cigarettes on a per-puff basis.