Salceda urges continued operations vs smuggled, mislabeled vapes

FILE PHOTO: In this October 18, 2019 file photo, a man blows a puff of smoke as he vapes with an electronic cigarette. On tuesday, March 19, 2024, Albay 2nd District Rep. Joey Salceda said operations against smuggled vapes or electronic cigarettes should continue. INQUIRER FILES

MANILA, Philippines — Albay 2nd District Rep. Joey Salceda said operations against smuggled vapes or electronic cigarettes should continue.

He said companies importing vapes should not evade payment of government taxes, as well as violate the existing law on e-cigarettes.

Salceda backed the decision of the Department of Trade and Industry (DTI) to suspend the operations of Flava, which was the subject of investigations by the House of Representatives committee on ways and means.

“I am very pleased with the DTI’s move to shut FLAVA down. We are already looking at a minimum of P9.3 billion in smuggled goods and evaded taxes by this company. And looking at the proliferation of its goods in local markets, there is more to be uncovered,” the House panel chair said in a statement.

“So, I strongly urge the Bureau of Customs (BOC) to keep on doing raids. There is probably more in warehouses,” he added.

READ: DTI stops sale of branded vape products over violations

According to Salceda, government collections went down from P176 billion in 2021 to just P142 billion in 2023 due to the proliferation of smuggled vapes.

The Albay congressman stressed the importance of taxes on tobacco and related products which help fund the country’s Universal Health Care law.

“And the decline will continue as more people shift from the taxed cigarettes to the untaxed. Make no mistake, that’s a threat to everyone, because Universal Health Care derives funding from tobacco excise taxes,” he explained.

The DTI on Monday announced it has suspended the sale, manufacture, importation, and distribution of vape products under the Flava brand.

READ: House panel subpoenas execs of 2 vape firms for tax evasion

It said that the preliminary order stoppage to the trade of Flava Corp.’s vape products was issued on March 15, based on the e-cigarette firm’s continued violations of Republic Act No. 11900 or the Vape Law.

The investigation of the House committee on ways and means started after Cagayan de Oro City 2nd District Rep. Rufus Rodriguez filed House Resolution No. 1437, which sought a probe into the BOC’s raid in Valenzuela City last October 27, where P1.43 billion worth of Flava e-cigarettes were seized.

During the hearings, allegations surfaced that Flava has been marking its products as freebase nicotine when it should be labeled as nicotine salts..

Under Republic Act No. 11900 or the Vaporized Nicotine and Non-Nicotine Products Regulation Act, freebase nicotine has a lower tariff compared to nicotine salts because the latter has a higher concentration rate and, therefore, would be more potent.

Salceda explained that freebase nicotine products are taxed at P60 per 10 milliliter (mL), while nicotine salt has a tariff of P50 per one mL. Companies can save, albeit illegally, by misdeclaring nicotine salts as freebase nicotine.

Salceda then suggested that it might be better to eliminate the differences between freebase nicotine and nicotine salt to prevent firms from marketing products as freebase nicotine and save on tax expenses.

“Policy-wise, I want to eliminate the distinctions between freebase and nicotine salt, because the differential in rates has also been abused,” he pointed out.

“For a 10mL pod, the tax on free base is P60, but P520 for salt nic. FLAVA has been labeling its goods as freebase, when independent testing finds it appears to be nicotine salt,” he also said.

“Reducing the de minimis value to around P3,000, the regional average, is also an option given the massive tax leakage from electronic commerce,” he added.