House legislators and tobacco industry stakeholders are advocating for a balanced excise tax framework to help cover expected revenue losses from a proposed income tax reduction.
The strategy aims to bolster revenue collections, curb illicit trade, and preserve risk-based tax distinctions that encourage adult smokers to transition away from traditional cigarettes.
During an August 11 hearing before the House Committee on Ways and Means, Cagayan de Oro City 2nd District Representative Rufus Rodriguez introduced House Bill 5364, also known as the Vape Tax Unification Bill. The proposal seeks to apply a single, uniform tax rate to both nicotine salt and freebase nicotine vapor products.
Rodriguez estimated that the measure could generate an average of ₱6 billion in annual revenues from 2027 to 2030, while strengthening tax compliance and reducing illicit trade rates to as low as 10 percent by 2028.
Currently, vapor products containing nicotine salt face a tax of roughly ₱60 per milliliter, whereas freebase nicotine products are taxed at ₱69.50 per 10 ml, or ₱6.95 per ml. Citing 2025 figures from the Bureau of Internal Revenue, Rodriguez pointed out that freebase nicotine items accounted for more than 90 percent of total vape excise tax collections.
”No one is declaring their vape products as made of nicotine salt but instead declaring or misdeclaring the same as freebase nicotine,” Rodriguez said.
Framing the bill as a public health initiative, Rodriguez pointed to an August 2015 study by Public Health England showing e-cigarettes are roughly 95 percent less harmful than conventional smoking.
”Risk-based taxation is not new. We use this principle when we provide less tax or zero tax to electronic vehicles vis-à-vis gasoline-type vehicles. In the same manner, less harmful cigarette alternatives should be taxed less,” Rodriguez said.
Rodriguez added that the country’s adult smoking population remains steady at around 16 million, with World Health Organization figures indicating an annual quit rate below 4 percent. He highlighted a 2023 study demonstrating that if half of Filipino smokers transitioned to smoke-free alternatives, the $9.8 billion yearly economic burden of smoking-related illnesses could drop by 35 percent, saving around $3.4 billion.
Manila 2nd District Representative Rolando Valeriano introduced a complementary proposal via House Bill 10289, which also calls for a standardized excise tax across all vapor categories. His bill sets a uniform rate of ₱15 per milliliter in 2027, followed by a 5 percent annual increase starting in 2028.
In its explanatory notes, Valeriano’s bill highlighted the massive gap between tax rates for nicotine salt and freebase formulations.
”Such disparity has created regulatory loopholes and incentivized tax avoidance, contributing to substantial revenue loss,” the bill’s explanatory note said.
”By adopting a single rate across all vapor product types, the measure eliminates classification ambiguities, enhances compliance, and fosters equitable treatment among industry stakeholders,” it added.
Representing the private sector, the Philippine E-Cigarette Industry Association (PECIA) expressed support for a streamlined tax system, suggesting a single ₱10-per-milliliter rate.
”We believe a uniform rate removes the incentive for misclassification or misdeclaration, gives BIR and BOC a simpler basis for enforcement and helps keep legitimate products within the legal, regulated, and taxable market,” PECIA President Joey Dulay told the committee.
Dulay warned that setting tax rates excessively high would penalize legitimate businesses and push consumers into black-market alternatives.
”The highest statutory tax rate is not necessarily the highest revenue producing rate,” Dulay said. “Our position is therefore simple: protect our children. Enforce the law, eliminate the illicit market, and tax the legitimate market at a rate that keeps it inside the tax system.”
When lawmakers questioned whether PECIA members participated in illicit distribution, Dulay firmly rejected the notion.
”Sa aming experience po, hindi po nangyayari ‘yan,” Dulay said.
“We represent the compliant industry. Ang association po namin ay 100% compliant. Ang parati nga din namin sinasabi na we have to acknowledge the fact, dito sa vapor industry, we have two separate industries. One is the compliant industry. We pay taxes, we follow the law. Two, there is a very large illicit market,” Dulay said.
“Kami po lahat sumusunod. Mahigpit po namin pinagbabawal ang illicit products sa aming mga miyembro,” he noted.