To Reduce Tax Leakage, Philippines BIR Requires Importers of Vaping Raw Materials to Obtain Permits

The Bureau of Internal Revenue (BIR) of the Philippines has announced that it will require importers of vaping raw materials to apply for special permits to release their goods. This decision comes as many new players have emerged in the vaping industry, necessitating regulation of the sector. BIR Commissioner Romeo Lumagui Jr. added that with the surge in vaping products, we are considering how to regulate management, as vaping production has become a "backyard industry."
In its latest tax advisory, the BIR mentioned that these raw materials include propylene glycol, vegetable glycerin, organic sweeteners, artificial flavors, and nicotine. Related equipment also includes heating elements, circuits, pods, liquid storage tanks, and mouthpieces.
In addition to release authorization, importers and manufacturers must also apply for business licenses. Commissioner Lumagui stated that the BIR is addressing the issue of declining tobacco tax revenues, primarily caused by illegal tobacco products. He aims to minimize the previous 20% tax revenue shortfall and reduce it by more than half within the year.
The BIR expects to collect 2.64 trillion pesos in taxes this year, with 336 billion coming from excise taxes. The expected excise tax revenue from tobacco products is 169.8 billion pesos. Commissioner Lumagui noted that the demand for legal cigarette products is declining, which may be due to the surge in illegal products. The BIR needs to monitor total consumption to assess whether it is genuinely declining or merely shifting to vaping.
According to the Philippine Customs, the value of illegal cigarettes and tobacco products seized by the end of July reached 1.89 billion pesos. In May, the BIR filed 69 tax evasion charges against tobacco traders worth 1.8 billion pesos. Last December, it also filed tax evasion charges against five vaping traders amounting to 1.2 billion pesos.