A task force created by Revenue Region No. 6-Manila headed by Bureau of Internal Revenue (BIR) Director Jethro M. Sabariaga through, the Regional Investigation Division (RID) led by Division Chief Atty. Maria Haidee Lourdes C. Organo, along with the Legal Division OIC-Chief Atty. Ramon B. Lorenzo, conducted investigations and took legal action against taxpayers within the jurisdiction of the Manila Region engaged in the sale and distribution of heated tobacco and vapor (Vape) products.
Discreet surveillance and test-buy operations undertaken by the task force on various dates identified two taxpayers registered under the region that are selling heated tobacco and vape products that are unregistered with the bureau.
A Certification obtained by the task force from the bureau’s Excise Large Taxpayers Regulatory Division disclosed that these taxpayers—Gizmobile Ventures Inc. and Luxecity Manila Inc.—are not registered as dealers/traders of these items, nor are Relx and Snowplus++, the brands in their inventories registered as excisable products.
On July 1, 2021, the RID, together with the assistance of the Legal Division, conducted a Tax Compliance Verification Drive (TCVD) operations and seized thousands of Relx and Snowplus++ heated tobacco and vape products being sold in several establishments, branches and kiosks around Manila, particularly in major shopping malls such as Robinsons Place Manila, Robinsons Otis, Robinsons Metro East Pasig, Met Live Macapagal and Shopwise Makati.
Director Sabariaga urged all taxpayers to comply with their tax obligations. “These are very challenging times, and the government needs all the help we can give through our taxes. As a former US Attorney General once said, ‘If you think compliance is expensive, try non-compliance!’ We have everything to gain by complying with our responsibilities as taxpayers.”
Records from the BIR showed that two years after the passage of Republic Act (RA) 11346, which imposed excise taxes on vapor products and heated tobacco products, the two distributors are still not paying the excise taxes due. Upon internal verification, the BIR National Office confirmed these goods as non-tax paid, and their respective distributors as not duly registered with the BIR Excise Tax division.
As of August 2020, the Department of Finance’s (DOF) “sin” tax collections reached P140.1 billion. Despite higher tax collections in 2020, rising illicit trade and production constraints at the height of the Covid-19 lockdown had resulted in low yields from vapor products and heated tobacco products.
Finance Assistant Secretary Maria Teresa Habitan previously stated that collections from these products did not even reach P1 billion, far from the P3.2 billion collection previously estimated by then Finance Undersecretary now Socioeconomic Planning Secretary Karl Chua during the 2019 Senate deliberations on taxing the category. BIR records also indicate that of the leading industry manufacturers and distributors, only the distributors of Philip Morris and Juul products have been paying their taxes since the passage of the new law.
Considered as a landmark legislation under the Duterte administration, RA 11346 imposed excise taxes on vapor products and heated tobacco products for the first time, at the base rate of P10/ml. Later on, the law was amended by RA 11467, which increased the tax rates to P37/ml in order to help boost the government’s excise tax revenue collections. Currently, vapor products are taxed at P42/ml.
RA 11467 earmarks 60 percent of revenues collected from excise taxes to finance the Universal Health Care Program of the government, while 20 percent will be spent for medical and health facilities. The remaining 20 percent will go to programs that will help the government to fulfill its commitment under the United Nations’ Sustainable Development Goals.