The Philippine E-Cigarette Industry Association (PECIA), which counts around 200 active members that comprise major players in the local e-cigarette market, participated in the online consultation conducted by Bureau of Internal Revenue implementing rules and regulations covering the provisions of Republic Act Nos. 11346 and 11467.
These laws govern the increase in excise tax on alcohol, tobacco products, heated tobacco products, and vapor products. These are important concerns that have a substantial impact on the business sector but also on public health, at large.
“The best policies are best designed and developed through a comprehensive process of consultation and partnership with the industry. We welcome the online consultation conducted by the BIR to discuss these important issues,” the PECIA said.
Floor price tool and production costs
According to PECIA, the current proposed floor price tool is a little inaccurate based on prevailing market standards in the Philippines. This the PECIA feels will result in an unwarranted increase in the prices of e-cigarettes and vapor products, thus encouraging a spike in combustible cigarette consumption, not to mention, the emboldening of black-market traders of vapor products brought in and sold via illicit channels.
Secondly, the proposed production cost formula is largely unrealistic and too high. The international market data used are on the high side, and PECIA has provided our inputs on more relevant numbers for the Philippines. Production cost, which is a component of the minimum price formula, needs to take into account multiple factors such as country of production, logistics considerations, cost of ingredients, cost of quality, and so forth.
The negative effects of higher prices of vapor products
It is worth considering that the inclusion of excise taxes and VAT already ensures that social costs are factored into the cost of vapor products, whereas combustible cigarettes—which have a higher health risk profile—do not have minimum pricing. The PECIA is of the opinion that imposing a floor price—wherein the current selling price of vapor products will more than double, rendering them practically unsellable—will inadvertently work against the government’s tobacco harm reduction mission, which the PECIA fully supports.
Ultimately, higher prices can and will discourage adult Filipino smokers from making the switch to vapor products, in obvious conflict with the government’s campaign towards tobacco control and the cessation of cigarette smoking. Furthermore, it is the lower-income adult Filipino smoker who is disproportionately impacted by higher pricing, denying them the better option of choosing a product with a significantly lower health risk profile. And from a business standpoint, it is clear that the growing number of small vape businesses will be the hardest hit—in what is already a challenging economic environment—should this be implemented.
One in helping the government
The PECIA wishes to make clear its full support to the government, both in its revenue-generating measures and in making known to all the negative health effects of cigarette smoking—which can be curtailed among adult Filipino smokers with vapor products as an alternative. However, with the prospects of higher prices brought about by unequitable taxation, this option becomes unfairly out of reach for many, causing numerous unintended consequences.
“PECIA supports the government’s tobacco harm reduction goal, and will do our best in the pursuit of its success. We believe vapor products have a major role to play in this, and we welcome the opportunity to provide our inputs, technical and qualitative, to the policy makers in charge,” the PECIA said.