Philippines Considers Unified Tax Rate for Nicotine Products

Jan.17.2025
Philippines Considers Unified Tax Rate for Nicotine Products
DOF proposes unified tax rate on all nicotine products in Philippines to simplify taxation management, amid concerns of tax avoidance.

According to a report by Bworldonline on January 16th, the Department of Finance (DOF) of the Philippines has proposed a uniform tax rate for all types of nicotine and vaping products to streamline the tax administration of the Bureau of Internal Revenue.


During a hearing at the Senate Blue Ribbon Committee, Assistant Secretary Karlo S. Adriano Fermin of the Department of Finance stated that manufacturers tend to label their products as low-taxed freebase nicotine rather than salt nicotine, as it is difficult to differentiate between the two. This is done in order to reduce tax burdens.


According to the customs bureau's tax rate regulations for 2024, the government imposes a tax of 57 pesos per milliliter (0.9 USD) on salt nicotine products, 6.3 pesos per milliliter (0.1 USD) on freebase nicotine products, and 65 pesos for every 10 milliliters (1 USD) on classic nicotine products.


Adriano pointed out that, in order to simplify tax management convenience, the Ministry of Finance hopes to adopt a single tax rate for nicotine products, as the national tax authority lacks the ability to accurately distinguish between types of products.


Finance Minister Ralph G. Recto has stated that the Ministry of Finance is willing to discuss increasing the consumption tax on tobacco products, but has also warned that continued tax hikes may stimulate illegal smuggling activities.


The House tax committee has proposed suspending annual tax increases on tobacco products. An alternative bill obtained by Bworldonline, which is not numbered, shows that the suspension will begin on January 1, 2025, and last until December 31, 2026, after which a 5% tax increase will be implemented every three years.


Adolfo Jose A. Montesa, a member of the fiscal policy team, stated that the focus should be on enforcement and the need for a tracking system for tobacco products. He urged the Ministry of Finance to enhance coordination with law enforcement agencies and increase penalties for smugglers.


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