Due to the decline in the demand for cigarettes and the shift of consumers towards vapes, the Philippine Internal Revenue Service (BIR) expects the excise tax target to be difficult to achieve this year, and the vape tax increase will not be able to compensate for the decline in tobacco tax.
The Philippine Internal Revenue Service (BIR) will struggle to meet its excise duty target of PHP362.2 billion (about $6.3 billion) this year due to falling demand for cigarette commodities, Bworld Online reported on October 20.
BIR Assistant Commissioner Jethro Sabariaga said excise duty on cigarettes accounts for more than 40% of the country’s excise revenue. However, cigarette consumption has continued to decline over the past decade.
- “Few people smoke now and intuitively feel the change in market demand.”
He also added that tax increases on other taxable products could not compensate for the drop in excise duty on cigarettes.
The shift of customers to vape brands is also having an impact on the government’s excise tax revenue. According to the commissioner, the excise duty on vapes is equivalent to a packet of tobacco, but vapes are generally consumed more slowly.
- “If a smoker switches to vapes, someone who normally consumes 10 to 15 bags of tobacco a month may only buy one vape brand, or even worse, one every two months.”
Previously, BIR Director Romeo D. Lumagui noted that the illegal cigarette trade also makes it challenging for the government to collect excise taxes. In the first half of 2024, the agency lost about P7.2 billion ($120 million) in potential revenue from seized tobacco and vape brands.
As of the end of August, revenue from tobacco products amounted to 84.42 billion pesos ($1.5 billion), accounting for 43.31 percent of the total excise tax.
