AT the August 11 House of Representatives Committee on Ways and Means hearing, legislators and policy specialists advanced competing vape tax proposals while converging on one goal: strengthening government revenues without fueling illicit trade.
During the hearing, Cagayan de Oro City Rep. Rufus Rodriguez advocated for House Bill 5364, the Vape Tax Unification Bill, which seeks to harmonize excise taxes across nicotine salt and freebase nicotine vapor products.
Rodriguez said his team projects the bill to yield average annual revenues of around P6 billion between 2027 and 2030, while also improving compliance and reducing illicit trade to as low as 10 percent by 2028.
The current system taxes nicotine salt vapes at P60 per milliliter, while freebase nicotine products face a much lower rate of P69.50 for 10 milliliters, or just P6.95 per milliliter.
Citing 2025 Bureau of Internal Revenue (BIR) statistics, Rodriguez emphasized that freebase nicotine products accounted for more than 90 percent of excise taxes collected across all vape categories.
‘No one is declaring their vape products as made of nicotine salt but instead declaring or misdeclaring the same as freebase nicotine,’ Rodriguez said.
Rodriguez framed the bill as a harm-reduction tool, referencing Public Health England’s 2015 review that found vaping to be around 95 percent less harmful than cigarette use.
‘Risk-based taxation is not new. We use this principle when we provide less tax or zero tax to electronic vehicles vis-à-vis gasoline-type vehicles. In the same manner, less harmful cigarette alternatives should be taxed less,’ Rodriguez said, explaining that the proposal aligns with Republic Act No. 11900, the country’s established regulatory framework for vaporized nicotine and non-nicotine products.
He stressed that despite public health efforts, the number of Filipino smokers remains at roughly 16 million, virtually stagnant over the last decade. WHO data reveal that less than 4 percent manage to quit annually.
Citing a 2023 cost-of-illness study, Rodriguez said that if 50 percent of adult smokers in the Philippines switched to smoke-free products, the $9.8 billion yearly cost of smoking-related illness could decline by 35 percent-equivalent to $3.4 billion.
Manila Rep. Rolando Valeriano filed House Bill 10289, seeking to standardize excise taxes across all vapor products. His proposal establishes a P15-per-milliliter rate in 2027, followed by yearly 5 percent increases beginning in 2028.
The measure’s explanatory note highlighted the wide gap in current excise taxes applied to nicotine salt versus freebase nicotine vapor products.
‘Such disparity has created regulatory loopholes and incentivized tax avoidance, contributing to substantial revenue loss,’ the bill’s exploratory note said.
‘By adopting a single rate across all vapor product types, the measure eliminates classification ambiguities, enhances compliance, and fosters equitable treatment among industry stakeholders,’ it added.
The Philippine E-Cigarette Industry Association (Pecia), meanwhile, threw its support behind a P10-per-milliliter unified excise tax, stressing the need for consistency across vapor products.
‘We believe a uniform rate removes the incentive for misclassification or misdeclaration, gives BIR and Bureau of Customs a simpler basis for enforcement and helps keep legitimate products within the legal, regulated, and taxable market,’ PeciaPresident Joey Dulay told the committee.
Dulay warned that an overly high tax rate would push legal products out of the market, deprive the government of revenue, and erode its authority to regulate and control illicit trade.
‘The highest statutory tax rate is not necessarily the highest revenue producing rate,’ Dulay said. ‘Our position is therefore simple: protect our children. Enforce the law, eliminate the illicit market, and tax the legitimate market at a rate that keeps it inside the tax system.’
Responding to a question on whether Pecia members might be selling illicit products, Dulay said, ‘Sa aming experience po, hindi po nangyayari ‘yan.’
‘We represent the compliant industry. Ang association po namin ay 100 percent compliant. Ang parati nga din namin sinasabi na we have to acknowledge the fact, dito sa vapor industry, we have two separate industries. One is the compliant industry. We pay taxes, we follow the law. Two, there is a very large illicit market,’ he went on.
‘Kami po lahat sumusunod. Mahigpit po namin pinagbabawal ang illicit products sa aming mga miyembro,’ Dulay added.
‘We support strict age verification, stronger enforcement against sales to minors, the 100-meter restriction around schools, stronger online controls, and aggressive action against youth-oriented marketing and illegal products. Vapor products are not risk-free and they must never be sold to minors,’ he said.
‘Kaya po kami po talagang suportado namin lahat po ang mga health concerns din po, lalo na po sa youth. Ang RA 11900 po, marami pong safeguards para i-prevent ang youth uptake. Ang importante lang po talaga is proper enforcement,’ Dulay said.
Caps and Partners Inc. President and Chief Executive Officer Michael Eric Castillo cautioned that raising tax rates does not automatically advance public health objectives, urging the Department of Finance (DoF) to first assess the size of the illicit vape market before setting an optimal rate.
He suggested that the DoF draw on established approaches from organizations including United Nations Office on Drugs and Crime, the U.N. Conference on Trade and Development, the European Union Intellectual Property Office, Global Financial Integrity, and the World Bank.
Castillo noted that prohibition has not always remained the long-term policy approach for vapor products.
Among countries that later moved toward regulation are New Zealand, Malaysia and Canada.
He also warned lawmakers of a troubling pattern – smoking rates and tax levels climbing, while government collections continue to shrink.
‘This simply indicates tax leakage, illicit substitution, declining legal consumption, and enforcement limitations. You cannot maximize taxation if a substantive portion of the market is not covered by your tax system,’ Castillo said.