The Philippine Finance Ministry has proposed a uniform tax rate on nicotine products to simplify tax administration, with the finance minister warning that continued tax increases could spur smuggling.
Philippine Department of Finance Proposes Harmonizing Tax Rates on Nicotine Products
The Philippine Department of Finance (DOF) has proposed implementing a flat tax rate on all types of nicotine and vaping products to simplify the administration of collection by the Internal Revenue Service.
According to Karlo S. Adriano Fermin, assistant secretary of the Treasury, who testified before the Senate Blue Ribbon Committee, because of the difficulty in distinguishing between free alkali and salt nicotine, Manufacturers tend to label their products as low-tax free-base nicotine to reduce their tax burden.
According to the Customs Bureau’s tax rate regulations for 2024, the government taxes salt nicotine products at 57 pesos (US $0.9) per milliliter, free base nicotine products at 6.3 pesos (US $0.1) per milliliter, and classic nicotine products at 65 pesos (US $1) per 10 milliliters.
Adriano noted that to simplify the ease of tax administration, the Treasury Department wants a single tax rate on nicotine products because the IRS cannot distinguish exactly what kind of products are available.
Finance Minister Ralph G. Recto said his department is open to discussions about raising consumption tax rates on tobacco products, but warned that continued tax increases could spur smuggling.
The House Committee on Taxation has recommended suspending annual tax increases on tobacco products. An unnumbered alternative bill seen by Bworldonline shows that the pause would start on Jan. 1, 2025, and run until Dec. 31, 2026, with a 5 percent tax increase every three years thereafter.
Adolfo Jose A. Montesa, A member of the fiscal policy team, said the focus should be on law enforcement and a tracking system for tobacco products is needed, urging the Finance Ministry to strengthen coordination with law enforcement and increase penalties for smugglers.
