Bureau of Internal Revenue Regional Director for Manila Jethro Sabarriaga has vowed to go after delinquent business establishments that failed to pay their taxes properly, reminding them of their duty as responsible corporate citizens after a series of raids on establishments selling thousands of unregistered e-cigarettes and heated tobacco products.
“While the BIR fully supports and encourages all lawful conduct of business in the country, the agency must also ensure that all persons fulfill their duty to pay taxes,” Sabarriaga said after a raid recently conducted by the BIR-Manila in various malls revealed that some vapor and electronic-cigarette products being sold are not registered with the tax-collecting agency.
On 1 July, the Regional Investigation Division with the assistance of the Legal Division, conducted Tax Compliance Verification Drive operations and seized thousands of Relx and Snowplus++ heated tobacco and vape products sold in several establishments particularly in major shopping malls such as Robinsons Place Manila, Robinsons Otis, Robinsons Metro East Pasig, Met Live Macapagal and Shopwise Makati.
“We appeal to all Vapor Product and Heated Tobacco Product companies doing business in the country to duly register your company and products with the BIR,” the Director said. “And for those who continue to be non-compliant on the payment of proper taxes, the BIR will clamp down on you.”
“Let us all help the government raise revenues especially during these trying times. Let us all do our share and pay the proper taxes,” Sabarriaga stressed, noting that the Department of Finance still continues to work towards reaching its P297.8 billion excise tax collection target for 2021.
Records from the BIR show that two years after the passage of Republic Act 11346, which imposed excise taxes on Vapor Products and Heated Tobacco Products; the three distributors are still not paying excise taxes. 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 “sin” tax collections reached P140.1 billion. Despite higher tax collections in 2020, rising illicit trade and production halt at the height of the COVID-19 lockdown had resulted in low yields from Vapor Products and Heated Tobacco Products.
DOF 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 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 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 help boost the government’s excise tax revenue collections. Currently, Vapor Products are taxed at P42/ml.
RA 11467 earmarks 60% of revenues collected from excise taxes to finance the Universal Health Care Program of the government, while 20% will be spent for medical and health facilities. The remaining 20% will go to programs that will help the government to fulfill its commitment under the United Nation’s Sustainable Development Goals.