Manila Bulletin
Philippines
National
Lawmakers, experts back risk-based excise taxes as gov't seeks to recover revenue loss
Philippines
National
Lawmakers, experts back risk-based excise taxes as gov't seeks to recover revenue loss
Lawmakers, experts back risk-based excise taxes as gov't seeks to recover revenue loss
Published Aug 17, 2026 04:13 pm
As Congress seeks ways to recover billions of pesos in foregone revenues from a proposed
income tax cut package, lawmakers and policy experts are calling for a balanced excise
tax regime that can help raise government revenues without fueling illicit trade, while
preserving risk-based tax differentials that encourage adult smokers to switch away
from cigarettes.
During the August 11 hearing of the House Committee on Ways and Means, Cagayan
de Oro City Second District Rep. Rufus Rodriguez pushed for House Bill 5364, or the
Vape Tax Unification Bill. The bill seeks to unify the tax on nicotine salt and freebase
nicotine vapor products.
Rodriguez said his team projects the bill would generate average annual collections of
P6 billion from 2027 to 2030, along with improved tax compliance and a drop in illicit
trade incidence to as low as 10 percent by 2028.
Under the current system, nicotine salt vape products are taxed at about P60 per 1 ml,
while freebase nicotine products are taxed at P69.50 per 10 ml, or P6.95 per 1 ml.
Rodriguez cited 2025 Bureau of Internal Revenue data showing more than 90 percent
of excise taxes collected across all vape categories came from freebase nicotine
products.
"No one is declaring their vape products as made of nicotine salt but instead declaring
or misdeclaring the same as freebase nicotine," Rodriguez said.
Rodriguez described the proposal as a harm-reduction measure, citing an August 2015
Public Health England review that estimated electronic cigarettes are about 95 percent
less harmful than smoking.
"Risk-based taxation is not new. We use this principle when we provide less tax or zero
tax to electronic vehicles vis-à-vis gasoline-type vehicles. In the same manner, less
harmful cigarette alternatives should be taxed less," Rodriguez said.
He said some 16 million Filipino smokers in the Philippines have not declined
significantly over the past decade, and World Health Organization data show an annual
quit rate below 4 percent among them.
Rodriguez also cited a 2023 study using a cost-of-illness approach, which found that if
50 percent of adult Filipino smokers switched to smoke-free alternatives, the $9.8 billion
annual cost of smoking-related illness could fall by 35 percent, or $3.4 billion.
Manila Second District Rep. Rolando Valeriano has filed a separate proposal, House Bill
10289, which similarly seeks a uniform excise tax on vapor products regardless of
nicotine formulation. His bill proposes a P15-per-milliliter rate beginning in 2027,
followed by annual increases of 5 percent beginning in 2028.
In its explanatory note, the bill pointed to the wide disparity between the current tax
rates for nicotine salt and freebase nicotine products.
"Such disparity has created regulatory loopholes and incentivized tax avoidance,
contributing to substantial revenue loss," the bill's explanatory note said.
"By adopting a single rate across all vapor product types, the measure eliminates
classification ambiguities, enhances compliance, and fosters equitable treatment among
industry stakeholders," it added.
The Philippine E-Cigarette Industry Association (PECIA), meanwhile, backed a P10-per-
milliliter unified excise tax on vapor products.
"We believe a uniform rate removes the incentive for misclassification or misdeclaration,
gives BIR and BOC a simpler basis for enforcement and helps keep legitimate products
within the legal, regulated, and taxable market," PECIA President Joey Dulay told the
committee.
Dulay warned that a very high tax rate could make legal products increasingly
uncompetitive and cause the government to lose revenue as well as its ability to
regulate and monitor the market.
"The highest statutory tax rate is not necessarily the highest revenue producing rate,”
Dulay said. “Our position is therefore simple: protect our children. Enforce the law,
eliminate the illicit market, and tax the legitimate market at a rate that keeps it inside the
tax system."
Asked whether PECIA members might also be selling illicit products, Dulay said, "Sa
aming experience po, hindi po nangyayari 'yan."
“We represent the compliant industry. Ang association po namin ay 100% compliant.
Ang parati nga din namin sinasabi na we have to acknowledge the fact, dito sa vapor
industry, we have two separate industries. One is the compliant industry. We pay taxes,
we follow the law. Two, there is a very large illicit market,” Dulay said.
“Kami po lahat sumusunod. Mahigpit po namin pinagbabawal ang illicit products sa
aming mga miyembro,” he noted.