Filipino legislators are seeking to streamline the split-tier tax regime on vapor products in a bid to recover substantial government revenue losses.
Backed by more than 40 legislators, House Bill 5207 seeks to align the tax treatment of nicotine salt and freebase nicotine, with Deputy Speaker Kristine Singson-Meehan and four other solons among its proponents.
Supporters of the measure contend that taxing nicotine salt at P60.20 per milliliter while charging only P6.95 per milliliter for freebase nicotine creates loopholes that encourage misreporting and evasion.
To correct the imbalance in taxation, the bill will hike taxes on freebase nicotine products, thereby eliminating the loophole that stems from the current disparity with nicotine salt.
“All told, this bill seeks to lessen the burden on the legitimate businesses, level the playing field, discourage illegal trading practices that expose consumers to unregulated products and ensure fair competition in the market,” the authors of the bill said.
According to the proponents, the 900-percent disparity in tax rates has created a loophole that enables importers to misdeclare nicotine salts as freebase nicotine. Senator Win Gatchalian, chair of the Ways and Means Committee, has pegged the annual revenue loss at P14.8 billion.
The 2024 regulation requiring revenue stamps on vape products has not curbed non-compliance, according to the bill. It highlights how illicit traders misdeclare salt nicotine as freebase, exploiting regulatory blind spots and the government’s lack of capacity to differentiate between product types.
Despite higher reported withdrawals of vapor products, Bureau of Internal Revenue (BIR) data reveal that collections have weakened. The average excise rate plunged from P42 per milliliter in 2021 to P9 in 2025, pointing to a market dominated by products taxed as freebase nicotine.
According to economists and industry players, HB 5207 would harmonize Philippine rules with international and regional norms that impose a uniform tax on vapor products. The bill promises easier administration and stronger compliance.
Bienvenido Oplas Jr., president of Minimal Government Thinkers and an international fellow at the Tholos Foundation, welcomed HB 5207. He outlined four expected benefits of a single tax rate: streamlined administration, elimination of loopholes, harmonization with global norms, and a tax level proportionate to product risk.
“Risk-proportionate taxation is to incentivize switching to less harmful products, for those who cannot quit smoking,” said Oplas.
Meanwhile, Philippine E-cigarette Industry Association (PECIA) president Joey Dulay maintained that excise duties should be restricted to consumables, rather than delivery devices, to ensure fair and practical regulation.
“While we advocate for a unified tax structure across freebase and nicotine salt liquids, we believe that imposing taxes on vaping hardware undermines the principles of harm reduction,” Dulay said.
“The hardware, which consists of the heating device, chargers and cables, does not warrant a specialized tax. Since the consumables are already subject to duty, taxing the device itself constitutes an unfair double taxation on the end-user,” Dulay said.
“To remain consistent with public health goals, taxation should reflect the relative risk of the product; therefore, vapor products should be taxed significantly lower than traditional cigarettes,” he said.
