E-cigarette industry resisting taxes on par with tobacco

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Photo shows a man vaping. Industry groups said that taxing e-cigarette and vapor products on par with regular cigarettes will not curb tobacco use and will discourage use of their “less harmful alternatives” if they were taxed at the same rate. -- PEXELS/NATHAN SALT

THE e-cigarette lobby said its products are safer than traditional products and asked the government not to tax it at the same rate as tobacco-based products.

Industry groups said Friday that taxing e-cigarette and vapor products on par with regular cigarettes will not curb tobacco use and will discourage use of their “less harmful alternatives” if they were taxed at the same rate.

The Philippine e-cigarette Industry Association (PECIA) and the Vapers Philippines (Vapers PH), in separate statements, urged legislators to consider studies which found that e-cigarettes and vapor products are a “significantly less harmful alternative.”

“Heavy taxes on reduced-risk products will only result in smokers sticking it out with conventional cigarettes instead of switching to less harmful nicotine products,” Vapors PH said.

PECIA also pushed for a public consultation on proposed tax legislation which they said will be a venue to discuss other measures to reduce tobacco use.

“PECIA wants to draw attention to the fact that Congress made no public consultation for the proposed legislation. Our organization could have provided the resources and studies to aid House Representatives understand tobacco harm reduction strategies being embraced by some countries,” PECIA said in the statement.

House Bill (HB) 1026, approved on second reading on Aug. 14, further raises the excise tax on heated tobacco or e-cigarettes to P45 per pack in 2020 and an incremental increase of P5 per pack per year, on par with regular cigarettes, while vapor products with nicotine salts increases the tax to P30 from the current P10 per milliliter, with an incremental P5 yearly increase to P45 by 2023.

However, the Department of Health-Department of Finance (DoH-DoF) version of the bill proposes that vapor products to be taxed at the same rate at P45 per milliliter with an incremental increase of P5 per year to P60 by 2023 and by 10% annually thereafter.

Vapers PH said the UK and New Zealand have encouraged their citizens to adopt “less harmful nicotine products, particularly e-cigarettes” instead of regular smoking.

“Experts believe that the remarkable decline in Japan’s smoking rate was accelerated by the entry of heated tobacco products in the Japanese market in 2014,” Vapers PH said.

Finance Undersecretary Karl Kendrick T. Chua, however, said e-cigarettes and vapor products should be taxed at par with regular cigarettes as taking e-cigarettes is “not necessarily more beneficial.”

“In the DoH and DoF proposal, and what the House approved yesterday, (the excise tax on e-cigarettes) was increased to 45 pesos to align with regular cigarettes because it doesn’t matter if it’s smoked, heated or burned, they have the same effect,” Mr. Chua said during the first ways and means committee hearing in the Senate on Thursday.

“A heated tobacco product is basically the same as the burnt tobacco product and should not be taxed differently,” Mr. Chua added.

Finance Secretary Carlos G. Dominguez III has said he hopes to raise taxes on heated tobacco and vapor products to parity with regular cigarettes.

The only remaining bill under the Comprehensive Tax Reform Program (CTRP) Package 2+ is the higher excise tax on alcoholic beverages, e-cigarettes and vapor products. The excise tax on tobacco products was signed into law last month.

HB 1026 is expected to go under final reading this week and may be transmitted to the Senate by the end of August.

According to DoF estimates, the DoH-DoF proposal on alcohol and e-cigarettes may generate around P52 billion while HB 1026 is expected to generate P33.3 billion by 2020.

If the DoH-DoF proposal is passed, the measures as well as the recently passed excise tax on Tobacco products will help reduce the Universal Health Care (UHC) funding gap to P10.4 billion from P62 billion in 2020.

In its initial implementation in 2020, UHC will need P257 billion, of which P195 billion will provided by the General Appropriations Act and other sources, P15.5 billion from the tobacco tax and P36.5 billion from the DoH-DoF version of the alcohol and e-cigarette tax, leaving a P10.4-billion funding gap.

In the Senate, the ways and means committee is set to start parallel hearings to dicuss the remaining tax reform packages, beginning with those that have advanced in the House, such as the excise tax on alcohol and e-cigarettes and HB 313 or the Corporate Income Tax and Incentives Reform Act (CITIRA).

CITIRA cuts the corporate income tax rate to 20% from the current 30% while streamlining investor incentives by making them time-bound and performance-based. — Beatrice M. Laforga