Key points:

• All e-cigarette products in the Philippines must now carry fourth-generation tax stamps, helping ensure payment of consumption taxes and crack down on smuggling.
• As cigarette use declines and vaping becomes more popular, the Bureau of Internal Revenue (BIR) sees e-cigarettes as a growing source of consumption tax revenue.
• Despite missing its 2024 target, the BIR saw improved collection performance, with a smaller shortfall than the year before and ambitious targets for 2025.

The Philippine Bureau of Internal Revenue (BIR) is optimistic that its newly implemented tax stamp system will improve tax compliance among e-cigarette producers and sellers, contributing to increased government revenue.

BIR Commissioner Romeo Lumagui said the introduction of the fourth-generation tax stamps—now required on all domestically produced and imported vaping products—should drive up compliance and close existing tax gaps. He noted that the growing popularity of e-cigarettes over traditional tobacco products presents a new opportunity to strengthen excise tax collection.

“We hope that with increased cooperation from e-cigarette industry practitioners, the tax revenue gap can be further narrowed,” Lumagui told Philstar.

The new stamp requirement, introduced in June 2024, is part of a broader strategy to curb illegal trade in vaping products. Under the policy, any e-cigarette sold without the appropriate tax stamp is deemed untaxed and subject to seizure. Businesses caught distributing the products could also face tax evasion charges.

While the BIR has yet to release detailed figures on the impact of the stamp system, overall excise tax collections in 2024 reached PHP 303 billion (US$5.3 billion), marking a 3.86% year-on-year increase. Although this fell short of the PHP 325 billion target by 6.7%, it represented a significant improvement over the previous year’s 13% deficit.

The bureau has set an ambitious consumption tax target of PHP 337.8 billion for 2025, an 11.4% increase from last year. Consumption taxes in the Philippines apply to products such as alcohol, tobacco, sugary beverages, and mineral goods, and account for roughly 12% of the country’s overall tax revenue.

Still, Lumagui acknowledged challenges ahead, especially as some e-cigarette production increasingly resembles small-scale, unregulated operations. “With the rise of ‘home workshop’ style production, it’s becoming harder to trace illegal products,” he admitted.