Filipino lawmakers are pushing a measure to unify the country’s split-tier tax system for vapor products, seeking to recover billions of pesos in lost government revenue.

HB 5207, backed by more than 40 lawmakers including House Deputy Speaker Kristine Singson-Meehan and 4 other solons who filed similar measures, seeks to eliminate the current tax disparity between nicotine salt and freebase nicotine.

Proponents said the existing gap, which taxes nicotine salt at P60.20 per milliliter and freebase nicotine at P6.95 per milliliter, encourages misdeclaration and tax evasion.

The measure will increase taxes on freebase nicotine products to close the loophole created by the wide tax disparity between nicotine salt and freebase liquids.

“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.

The 900 percent price difference has created a "tax leakage" where importers misdeclare high-tax nicotine salts as low-tax freebase nicotine, according to proponents. Senate Ways and Means Committee chair Win Gatchalian earlier estimated that this loophole costs the government P14.8 billion annually.

Despite a 2024 regulation requiring internal revenue stamps on all vape products, many non-compliant items remain available. The bill said illicit traders are exploiting regulatory gaps by mislabeling products. Some items containing salt nicotine are labeled as freebase or conventional nicotine to evade higher taxes as the government lacks the technical capacity to differentiate between the two.

Data from the Bureau of Internal Revenue (BIR) shows that despite a surge in reported vapor product withdrawals, government collections have not kept pace. The average excise rate collected per milliliter has plunged from P42.00 in 2021 to P9.00 in 2025, indicating that most products entering the market are being taxed at freebase rates.

"These illicit traders capitalize on such regulatory gaps to evade higher taxes imposed on certain nicotine varieties, ultimately undermining public health efforts and fair market practices," the bill proponents said.

"The bill seeks to remove the inordinate distinction on the excise taxes imposed between nicotine salt and freebase vapor products, through the imposition of one tax rate for all vapor products regardless of the type of nicotine used," the authors said.

Economists and industry players said HB 5207 would align Philippine regulation with global and Asian norms which imposes single tax rate for vapor products. The bill will also make taxation easier to administer, thereby encourage compliance.

Bienvenido Oplas Jr., president of Minimal Government Thinkers and an international fellow of Tholos Foundation in Washington D.C., welcomed HB 5207. He said that the proposal to adopt a single tax rate "is expected to produce at least four benefits. One, tax uniformity and ease of tax administration and collection by the BIR. Two, removal of loophole for tax evasion and arbitrary classification of products. Three, bring our tax system in line with international standards. Four, the tax level of vapor products should be consistent with the relative harm from use.”

“Risk-proportionate taxation is to incentivize switching to less harmful products, for those who cannot quit smoking,” said Oplas.

Meanwhile, excise taxes should be restricted to the consumable components rather than the delivery devices, according to Philippine E-cigarette Industry Association (PECIA) president Joey Dulay.

"While we advocate for a unified tax structure across freebase and nicotine salt liquids, we believe that imposing taxes on vaping hardware undermines the principles of harm reduction," Dulay said.

“The hardware, which consists of the heating device, chargers and cables, does not warrant a specialized tax. Since the consumables are already subject to duty, taxing the device itself constitutes an unfair double taxation on the end-user,” Dulay added.

"To remain consistent with public health goals, taxation should reflect the relative risk of the product; therefore, vapor products should be taxed significantly lower than traditional cigarettes," he said.