Japan Tobacco International (JTI) has supported the Department of Finance’s (DOF) proposed unified tax rate on e-cigarette products, saying the measure could curb misdeclaration and plug tax leaks from illicit trade.
Shaiful Mahpar, director for corporate affairs and communications at JTI Philippines, said the proposal would close a loophole in what he described as ‘technical smuggling,’ where traders misdeclare products to take advantage of lower tax rates.
‘The new proposal to increase the tax rate for e-cigarettes in the Philippines is a timely thing. The position of JTI Philippines is that we support this unification of the tax rate, because it is to prevent smuggling and also to allow the government to gain its fair share of revenues,’ Mahpar told visiting journalists.
Currently, e-liquids are subject to different tax rates depending on whether they contain salt nicotine or freebase nicotine. The DOF is proposing a unified excise tax of P72.93 per 2 milliliters or 2 grams on e-cigarettes and heated tobacco products, plus a P150 excise tax per device.
The proposal will generate an additional P8.26 billion in annual revenues if implemented.
‘The reality of it is that there is no way at ports for you to distinguish between what’s freebase and what’s salt-liquid by sight. You need to go to a lab to know that,’ Mahpar said.
‘They have been misdeclaring salt-liquid to be freebase liquids because the tax rate for salt-liquid versus freebase is eight to ten times less. Basically, you’re paying very little tax for something that is highly taxed. There’s a lot of technical smuggling happening,’ he added.
Meanwhile, JTI’s position comes as illegal cigarettes and vapes continue to account for a significant share of the Philippine market. Latest data showed that one in every four cigarettes sold in the country is illegal, equivalent to a 26.4 percent illicit incidence, above the Southeast Asian average of 16 percent.
Illicit vapes, meanwhile, accounted for 86.7 percent of the market, or nearly nine in every 10 products sold. This is equivalent to a P141-billion revenue loss from illicit trade in 2024 and 2025.
On enforcement, Valentin Dinca, regional director for JTI Anti-Illicit Trade Operations, said efforts should cover the entire supply chain, including small-scale retailers involved in domestic distribution.
‘This movement at the regional level is very well organized. And it arrives at a certain point where it has to do with rather domestic distribution channels,’ Dinca said.