DTI Assistant Secretary Marcus Valdez II
Some 93 percent of vape brands circulating in the Philippine market are unregistered, the Department of Trade and Industry (DTI) told lawmakers on Aug. 25, as a House panel examined the scale of illicit trade and the impact of the current excise tax structure on compliance.
DTI Assistant Secretary Marcus Valdez II told the House Committee on Ways and Means that the agency’s monitoring found 292 of 313 vape brands in the market were unregistered.
“From our survey, there are 313 vape brands in the market; about 292 are not registered. So, it’s at 93 percent,” Valdez said.
The pool of registered brands could narrow further. Valdez said two of the 18 previously registered vape brands he cited — Shift and Chillax — are now subject to cancellation, echoing findings the Bureau of Customs (BOC) reported to the committee.
Valdez said the DTI had given companies a window to meet registration requirements, but some continued to sell their products without complying. He said the agency has filed charges and imposed penalties against violators.
The DTI also detailed challenges in enforcing regulations against establishments operating outside normal business hours, as lawmakers raised concerns over vapor products reaching minors.
“I don’t think legitimate traders would be selling to minors. During our monitoring we would see retailers in the malls where they have explicit signs saying that minors are not allowed to enter. I know for a fact that in the big malls they are refusing to cater to minors. But for the establishments outside malls, here you find them [illicit sellers] in the strip malls or in the streets,” Valdez said.
“It’s been our experience that when we monitor during daytime these establishments are closed, they open at night when most of the government workers are already at home,” he said.
The extent of nonregistration also raised questions during the hearing about whether the tax structure is creating incentives for businesses to remain outside the legitimate market.
House Committee on Ways and Means Chair Rep. Miro Quimbo said the wide disparity between the tax rates imposed on nicotine salt and freebase products helps explain the low number of registered nicotine salt brands.
“They will not register because the tax is too high. It’s not because of the preferred chemical composition,” Quimbo said.
Against this backdrop, the DTI expressed support for unifying the excise tax rates imposed on nicotine salt and traditional freebase vapor products.
The Department of Finance (DOF), Bureau of Internal Revenue (BIR) and BOC also backed a shift from the existing two-tier system to a unified rate to improve enforcement, with the appropriate level of the rate still under discussion.
Rep. Roberto Nazal said lawmakers had established during the committee’s deliberations that the current system has allowed tax leakage.
“Based on earlier manifestations by our committee members, we’ve established that the current two-tier system enabled or allowed a tax leakage. Some are in agreement that a single tier will plug that loophole,” Nazal said.
Rep. Rufus Rodriguez pointed to BIR records showing no payments under the nicotine salt category despite the separate tax treatment. He urged lawmakers to adopt a unified P15-per-milliliter rate to improve collections without creating further incentives for consumers to patronize illicit products.
While lawmakers broadly discussed unification, they also raised the question of where the eventual vape tax rate should be set relative to cigarettes.
Rep. Bong Suntay urged fiscal agencies to consider the experience of mature economies that maintain different tax burdens for traditional cigarettes and vapor products.
“Mr. Chair, I’m trying to rationalize why in a lot of European countries, the tax rates are different between traditional cigarettes and vape products. There should be a reason. They have more advanced studies. They are more mature when it comes to taxation [of these products]. But here, why do we want to equalize the two categories? They should have a reason. I believe that when the wheel is not broken, we should not reinvent it,” Suntay said.
Economist Bienvenido Oplas cited Indonesia, the United Kingdom and New Zealand as examples of countries maintaining substantial excise differentials between cigarettes and e-cigarettes, placing the respective differentials at 45 percent, 96 percent and 100 percent.
The deliberations took place as revenue and enforcement agencies reported continued efforts to curb illicit tobacco and vapor products.
BIR data showed enforcement activities involving tobacco and vape products rising to 6,196 in 2026, with P1.7 billion in excise taxes due, compared with 2,318 activities and P122 million recorded in 2025.
BOC figures showed 253 tobacco seizure cases worth P10 billion in 2026, compared with 317 cases valued at P1.87 billion in 2025. Vapor product seizures totaled 18 cases worth P1.6 billion in 2026, versus 37 cases valued at P649 million in 2025.
BIR Head Revenue Executive Assistant Atty. Dondanon Galera said the agency’s experience on the ground showed illicit products increasingly being detected.
Nazal said these conditions should factor into lawmakers’ decision on the eventual tax rate, cautioning against setting it at a level that could undermine collections and push more consumers toward illicit channels.
“As mentioned by the Chairman, we do not want to overtax to the point that we will promote further smuggling and discourage investors from investing in our country,” Nazal said.
“That beyond a certain rate, we may not be raising more revenue at all but simply pushing consumers in volume to the illicit market,” he said.
