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Vape industry urged to improve tax compliance after lobbying for permissive regulation

THE vape industry must improve its tax compliance after having seeking a “loose” regulatory regime, a legislator said, claiming a shift in public opinion that now favors stricter handling of the industry.

“They asked for looser regulations, through the Vape Regulation Law, which supplanted many of the stricter conditions under the Tax Code, but they aren’t even paying taxes,” Albay Rep. Jose Ma. Clemente S. Salceda said in a statement.

The Vape Regulation Law took effect earlier in the year allowing electronic cigarette to be used by 18-year-olds instead of those aged at least 21. The law also transferred regulation of vapes and heated tobacco products to the Department of Trade and Industry from the Food and Drug Administration.

The Bureau of Internal Revenue reported during a House ways and means committee meeting that it collected P7 million in excise taxes from electronic cigarettes, against P242 million from heated tobacco products.

Mr. Salceda, who also chairs the ways and means committee, said market data suggests the vape market is generating P12.3 billion in sales. 

“In 2019, when the Vape Tax Law was being discussed, government revenue agencies projected as much as P1.4 billion in tax revenue annually from the measure,” he said. “In short, we are off target in taxes, while sales projections seem to be on track.”

He said the weaker-than-expected revenue generated by the industry “indicates the possibility of both smuggling and tax evasion going on.” 

Mr. Salceda filed House Bill 5532 which seeks to increase taxes on vape products by 14% and impose an additional tax on vaping devices.

The committee has created a technical working group to draft the committee report for the measure. — Matthew Carl L. Montecillo