Lawmakers and fiscal policy experts are pushing to unify excise tax rates on vapor products, noting that the current dual-rate system has fueled tax evasion and illicit trade while a single rate would close loopholes and strengthen revenue collection at a critical time when the nation needs economic boost.

“The distinction between nicotine salt and freebase products has created opportunities for widespread misdeclaration and tax leakage. We need a simpler, enforceable system that protects government revenues while helping authorities crack down on illicit trade,” said Cagayan de Oro Rep. Rufus Rodriguez.

Rodriguez said, given the economic impact of the ongoing crisis in the Middle East, there is an urgent need to address loopholes that continue to undermine tax collection and enforcement efforts to better support the economy.

“We should continue the discussions and deliberations on this measure as soon as possible. The longer these loopholes remain unresolved, the more revenues government loses and the more illicit traders benefit from the weaknesses in the current system,” Rodriguez said.

HB 5207, backed by more than 40 lawmakers and several solons who filed similar measures including Rodriguez, seeks to eliminate the current tax disparity between nicotine salt and freebase nicotine products.

Proponents of the bill said the existing gap which taxes nicotine salt at P60.20 per milliliter and freebase nicotine at P6.95 per milliliter has encouraged widespread misdeclaration and tax evasion among unscrupulous traders seeking to avoid higher excise taxes.

The measure would increase taxes on freebase nicotine products to narrow the disparity and close loopholes exploited by illicit traders. Supporters of the proposal said the reform is intended to simplify enforcement while ensuring fair competition among legitimate businesses.

“All told, this bill seeks to lessen the burden on the legitimate businesses, level the playing field, discourage illegal trading practices that expose consumers to unregulated products and ensure fair competition in the market,” the authors of the bill said.

Rodriguez said unifying the excise tax rate would also help reduce regulatory complexity for enforcement agencies and legitimate market players.

“We need to close loopholes and restore fairness in the market. A uniform tax structure makes compliance easier and will remove incentives for illegal operators to manipulate product classifications,” he said.

“The objective is not simply to increase taxes, but to create a system that can actually be enforced effectively,” Rodriguez added. “If the framework is too complicated and easily exploited, government loses revenues and illegal operators thrive."

During a previous hearing of the House Committee on Ways and Means in February, the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), and Department of Trade and Industry (DTI) supported unification of vape tax rates to simplify administration and enforcement.

At the same hearing, Finance Undersecretary Carlo Adriano noted that salt nicotine products appeared to have “disappeared” from official tax records in 2024 and 2025, while the BOC said it currently relies on DTI documentation for product classification.

The measure also drew support from think tank CAPS and Partners, which said the existing distinction between nicotine types has become outdated and difficult to enforce in practice.

CAPS and Partners president Eric Castillo said enforcement agencies currently face challenges to consistently verify nicotine classifications, creating vulnerabilities within the tax system.

“One of the critical flaws in the current system is the differentiation between nicotine salt and freebase nicotine. This is an outdated distinction because it has become a conduit for mislabeling, tax evasion, and enforcement inefficiencies,” Castillo said.

“Traders exploit this regulatory gap by misdeclaring products to avoid higher excise taxes,” he added.

In March this year, the Bureau of Customs (BOC) seized nearly 3,200 master boxes of illicit e-cigarettes and vape products worth more than ₱1 billion in Navotas City, which the agency described as its largest haul so far involving such products.

The think tank said the bill would help modernize the country’s nicotine taxation framework while supporting both public health objectives and fiscal stability.

“In 2023 alone, the Bureau of Internal Revenue estimated that the government lost ₱25.5 billion from illicit cigarette trade. The rise of unregistered and untaxed vapor products further weakens collections and undermines consumer protection,” Castillo said.