Philippine BIR to Intensify Crackdown on Illegal E-cigarette Market as Revenue Falls Short

According to the Manila Bulletin on November 7, Romeo D. Lumagui, Commissioner of the Bureau of Internal Revenue (BIR) in the Philippines, stated that it is uncertain whether the 1 billion pesos (approximately 17 million US dollars) collected from the e-cigarette excise tax will be enough to cover the country's consumption tax deficit by 2024.

Lumaji pointed out that, as the relevant system has just been launched, it appears that this revenue may still not be enough.

In May of this year, the BIR mandated that e-cigarette products must have a tax stamp affixed before distribution in order to increase tax compliance. According to Tax Memorandum Order No. 59-2024, this tax stamp system is similar to that of cigarettes, aimed at monitoring sales and ensuring correct taxation. E-cigarette products without the stamp will be confiscated, and owners will face charges of tax evasion.

Despite facing challenges with the consumption tax, Lumaguay expressed confidence in BIR's overall performance and highlighted that tax revenue had achieved double-digit growth.

I know we are doing well because our growth rate is in double digits. This is important, more important than inflation and GDP. As long as BIR's performance continues at this growth rate, it is good.

Recently, the BIR has intensified its crackdown on illegal e-cigarette retailers. Following a nationwide raid on October 16th, the number of weekly raids has increased. As of October 31st, a total of 506 illegal e-cigarette stores have been seized, with these businesses commonly found to be in violation due to non-payment of consumption tax, lack of tax stamps, and being unregistered.

The Lumaqui authorities have issued a warning, stating that BIR will not stop raiding illegal e-cigarette retailers or distributors until the e-cigarette industry complies with our tax laws and regulations. Regular raids are expected to take place.