Tax revenues from tobacco hit P129B; vape at P1.35B

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The government collected taxes worth P128.98 billion from tobacco and P1.35 billion from vape products from January to November 2024, according Secretary Frederick Go to the Office of the Special Assistant to the President for Investment and Economic Affairs.

In a speech read by Undersecretary Jose Guilas at the Tobacco Summit in Quezon City yesterday, Secretary Frederick Go said tax collections from vape products more than tripled the total collections of P361.6 million for the entire year of 2023, citing government figures.

Comparative figures on tobacco for January to November 2023 were not available but based on Go’s speech, the government generated about P134.1 billion in excise taxes from cigarettes for the whole of 2023, helping fund key government programs, including Universal Healthcare and infrastructure.

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Go said these numbers reflect the important contribution of the tobacco industry.

But Go said beyond tax contributions, the tobacco industry also provides livelihoods for approximately 2 million Filipinos.

Go made special mention of the investments and employment generated by cigarette makers Philip Morris International and Japan Tobacco International.

He said Philip Morris’ P8.8-billion investment in a manufacturing plant in Tanauan, Batangas, produces heated tobacco sticks called BLENDS, designed for use with the BONDS by I-COS.

“According to some players in the industry, Philip Morris is exploring the possibility of establishing additional plants in the Philippines. This is promising news for local tobacco growers and the wider industry,” Go said.

He also cited the tobacco contract growing system of the National Tobacco Administration which significantly helped over 9,300 farmers, promoting sustainable and market-driven production.

“Since their introduction, excise taxes on tobacco have become a cornerstone of government revenues,” said Go, adding in 2021, collections peaked at P176.2 billion.

However, between 2021 and 2023, excise tax revenues from cigarettes have declined by almost P42 billion to P134.1 billion, or a drop of about 23.9 percent, Go said.

Government revenues from heated tobacco products (HTPs) and vapor products amounted to only about P820.5 million in 2023 which did not make up for the shortfall in cigarette excise tax revenues, he added.

Go said this downturn has been raised earlier by Sen. Win Gatchalian, who highlighted concerns over widespread smuggling and illicit trade of excisable products, including cigarettes and vapes.

Over the years, there has been a shift towards HTPs and vape, Go added.

“However, regulation and the implementation of proper taxation measures for these new industries have not been able to keep up. The government is taking various steps to address these concerns. This matter has been brought up to the Cabinet’s attention to ensure prompt and responsive actions,” he said.

These include efforts on properly registering industry players, prioritizing compliance with health standards, and ensuring accurate tax payments in accordance with laws and regulations, ultimately boosting collection, he added.

Go noted the Bureau of Internal Revenue and Bureau of Customs’ intensified enforcement activities.

His office also helped facilitate the creation of the Office for the Special Mandate on Vaporized Nicotine and Non-Nicotine Products, their Devices, and Novel Tobacco Products (OSMV) to strengthen oversight of the industry, said Go.

OSMV is a specialized unit within the Department of Trade and Industry that is responsible for policy, monitoring, enforcement and product standardization within the vape and HTP industry.

For cigarettes, the excise tax rate was P63 per pack in 2024, with the tax rate to be increased by five percent every year thereafter.

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For vapor products, the excise tax rates are P54.60 and P63 for the Nicotine Salt and Salt Nicotine per milliliter and Conventional “Freebase” or ‘Classic’ Nicotine per 10 milliliter in 2024, respectively.

The specific tax rate shall also be increased by five percent every year thereafter.

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