According to a report from Manila Standard on March 14, the Philippine House of Representatives' Committee on Ways and Means has called on the Department of Trade and Industry (DTI) and the Bureau of Internal Revenue (BIR) to immediately revoke the commercial and production permits of e-cigarette company Flava.
The committee is chaired by Congressman Joey Sarte Salceda, who claims the company has violated the national e-cigarette law protecting minors, hence the recommendation being put forward.
During a congressional hearing, a series of investigations into Flava's alleged illegal activities, including tax evasion and violating Republic Act No. 11900 (the "Flavored Nicotine and Non-Nicotine Product Control Act") by selling flavored e-cigarettes to minors, were conducted. After deliberation, the committee approved the charges against Flava.
The Department of Trade and Industry (DTI) should revoke the business license and permit of "Flava Corp" for violating Republic Act 11900 in the Philippines. They should also monitor their actions and initiate the process to remove and confiscate Flava e-cigarette products from the market.
In addition, the chairman also called on the Securities and Exchange Commission to investigate Flava for business fraud, which violates the revised Companies Act.
The committee also found that, although Flava is registered with the national tax bureau as a manufacturer, it imports e-cigarette products from China for sale in the Philippines. Flava's executives claim that they only import e-cigarettes through Denkat Trading Corp (the largest e-cigarette distributor in the Philippines), however, Denkat denies ever representing Flava for imports.
Representative Rufus Rodriguez estimates that in 2023, the country lost 728 million pesos (approximately 13.1 million USD) in tax revenue due to the alleged smuggling of Flava illegal e-cigarettes worth 1.43 billion pesos (approximately 25.73 million USD). The committee also recommends filing a fine lawsuit against Flava Inc. for violating the National Internal Revenue Code (NIRC) and tax laws.
According to tax laws, the penalty for unpaid consumption tax is not less than ten times the amount of the tax owed, with a minimum penalty of 1 million pesos ($18,000 USD), and violators will face 5 to 8 years of imprisonment.
If the penalty is imposed on Flava, the Philippine government could receive fines of up to 7.2 billion pesos (1.2 billion US dollars).
The committee has also requested the tax authority to cease all sales of Flava e-cigarettes. According to Section 23 of Republic Act No. 11900, the tax authority must immediately recall, prohibit the sale or distribution of Flava company's e-cigarettes that are not registered with the tax authority. Any imported Flava company e-cigarettes cannot be properly considered as 'already registered with the tax authority', therefore, these products must be recalled, banned from sale, and seized.
In addition to the tax bureau, the committee also urged the customs bureau to file smuggling lawsuits against Flava and audit the importers clearing goods for them. Salceda stated that the customs bureau should also bring criminal charges against importers suspected of being involved in Flava's smuggling activities, such as Denkat and TopKing, as well as the management of these companies.
They collaborated with Flava in their criminal activities, assisting Flava in trading with Chinese exporters and customs imports.
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