Tax Stamp System Drives Compliance: E-Cigarettes as Key Revenue Source

Key points:

Tax stamp system promotes compliance: The Commissioner of the Philippines Bureau of Internal Revenue stated that the e-cigarette tax stamp policy aims to increase industry compliance to ensure that all tax revenues are collected.

E-cigarettes replacing traditional cigarettes as a key source of tax revenue: With a decline in cigarette consumption, e-cigarettes are gradually becoming a new source of tax revenue.

Tax revenue target increase: By 2025, the consumption tax target is 337.8 billion pesos (60 billion US dollars), representing an 11.4% year-on-year growth.

Tax revenue structure stable: Consumption tax revenue accounts for 12% of total tax revenue collected by the Bureau of Internal Revenue (BIR).

According to a report on April 17 by Philstar, Romeo Lumagui, the commissioner of the Bureau of Internal Revenue (BIR) in the Philippines, recently stated that with the implementation of the tax stamp system, it is expected that the compliance rate of e-cigarette industry players will increase, thereby driving overall consumption tax revenue growth.

We hope that with increased cooperation from e-cigarette industry practitioners, the tax revenue gap can be further narrowed.

He went on to explain that due to the shift in consumer preferences from traditional cigarettes to e-cigarettes, the consumption of cigarettes has significantly decreased. By capitalizing on this trend, the tax revenue gap can be further reduced.

In order to combat the smuggling of e-cigarettes, the BIR has required all imported and domestically manufactured e-cigarette products to use the fourth generation of domestic tax stamps since June of last year. Products without the tax stamp will be considered as not having paid the consumption tax, and such products may face seizure, with businesses potentially facing tax evasion charges.

Lumagui also admitted that with the increasing trend of e-cigarette production becoming more like "home workshop" industries, it has become more difficult to trace illegal products.

However, the Bureau of Internal Revenue (BIR) has not yet released specific data on the impact of tax stamp policies on the contribution of consumption tax. Data shows that the total consumption tax revenue in the Philippines in 2024 was 303 billion pesos (5.3 billion US dollars), a year-on-year increase of 3.86%. Although this fell short of the target of 325 billion pesos (5.7 billion US dollars) by 6.7%, it was a significant improvement over the previous year's 13% shortfall.

In 2025, BIR set a consumption tax revenue target of 337.8 billion pesos (60 billion US dollars), representing a year-on-year increase of 11.4%.

The value-added tax accounts for approximately 12% of the total tax revenue collected by the Bureau of Internal Revenue, encompassing goods such as alcohol, tobacco, sugary beverages, and mineral products.