Key Points:
·E-cigarette products have driven a 10% increase in consumption tax revenue for the Philippines in the first half of the year, reaching 135 billion pesos (approximately $2.4 billion).
·Tobacco consumption tax has also grown by 34%, with e-cigarette product tax revenues surging by 738% from 1.79 billion pesos (approximately $31.5 million) to 15 billion pesos (approximately $264.2 million).
·The Bureau of Internal Revenue (BIR) has taken full control of e-cigarette consumption tax collection through the stamp tax system.
This has led to improved industry compliance, with legal businesses shifting towards legitimate operations, thereby providing better protection for consumers.
【2Firsts News Flash】According to a report by The Philippine Star on July 16, e-cigarette products are gradually playing an important role in driving consumption tax revenue. With the Philippines government including them in the stamp tax system, consumption tax revenue increased by 10% in the first half of the year, reaching 135 billion pesos (approximately $2.4 billion).
According to data, the consumption tax from January to June increased by nearly 10% compared to the same period last year, reaching 1345.4 billion pesos (approximately 23.5 billion US dollars) from 1230 billion pesos (approximately 21.8 billion US dollars). This growth was primarily due to a 34% increase in tobacco consumption tax, rising from 439.5 billion pesos (approximately 7.7 billion US dollars) to 589.7 billion pesos (approximately 10.4 billion US dollars). In particular, the tax revenue from e-cigarette products surged by 738% from 1.79 billion pesos (approximately 3.15 million US dollars) a year ago to 15 billion pesos (approximately 26.42 million US dollars).
After including e-cigarette products (whether imported or locally produced) in the cigarette excise tax system, the Bureau of Internal Revenue (BIR) has completely taken control of the collection of consumption taxes on e-cigarette products.
"Therefore, we are able to regulate and monitor the taxability of products. In addition, cracking down on illegal products has led to an increase in tax revenue collection."
Assistant Commissioner of the Bureau of Internal Revenue in the Philippines, Jethro Sabariaga, told The Philippine Star.
In 2024, the Philippine Bureau of Internal Revenue is requiring all imported and locally produced e-cigarette products to use fourth-generation tax stamps.
The absence of tax stamps means that the consumption tax has not been paid, which may result in e-cigarette products being seized and could potentially lead to cases of tax evasion.
On the other hand, the Philippine E-Cigarette Industry Association (PECIA) stated that the increase in consumption tax revenue indicates that e-cigarette regulations are beginning to take effect. PECIA is an industry organization made up of approximately 300 domestic e-cigarette manufacturers and distributors.
PECIA President Joey Dulay stated that this improvement is mainly attributed to the increased industry compliance, with more participants now properly registered, licensed, and paying the correct consumption tax.
"Legal businesses have transitioned from the informal market to formal operations. Compliance has increased, leading to higher tax revenues and better consumer protection."
Dulay told The Philippine Star.
Apart from e-cigarettes, almost all categories of tobacco products have seen growth, such as cigarettes, cigars, and heated tobacco products.
Sabariah Yahya stated that this may be due to an increase in consumption of legal or taxed products, as well as a decrease in the proliferation of illegal white cigarettes due to the agency's strict crackdown and saturation of smuggled tobacco products.
"This marks a new paradigm in tax management - shifting focus from primarily tax collection to now reducing the proliferation of illegal products and removing untaxed products from the market."
He said.
Overall, tobacco and alcohol products accounted for 81% of total excise tax revenue in the first half of the year.
A consumption tax is a type of tax levied on the production, sale, or consumption of goods. It accounts for about 12% of the total revenue collected by the Bureau of Internal Revenue in the Philippines. Taxable products include alcohol, tobacco, petroleum, and minerals.
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