E-cigarette maker raises tax evasion red flag

December 1, 2023 Jester P. Manalastas 204 views

THE Bureau of Internal Revenue has been ordered to look into the licenses and product specifications of e-cigarette brand FLAVA.

According to House ways and means chairman and Albay Rep. Joey Salceda the government can slap fines of at least P7.3 billion if the said brand was proven to be evading the excise taxes.

During the Congressional hearing, it was disclosed that FLAVA had some 1.4 million stocks of 10 mL cartridges with lacking documentation, which were apprehended by the Bureau of Customs and suspected of not having paid the correct excise taxes.

“I requested the BIR to write today the Food and Drug Administration and the Bureau of Product Standards of the Department of Trade and Industry to validate the product specifications of the FLAVA,” Salceda said.

FLAVA is suspected of mislabelling its products as conventional freebase e-cigarettes, when there are reports that suggest it is of the salt nicotine variety. Freebase cigarettes are taxed at P60 per 10 mL, while salt nicotine, which is more concentrated, is taxed at P52 per mL.

“Under Section 263 of the NIRC, illicit trade in excisable products is subject to a penalty of not less than ten times the value of the excise tax evaded. The stocks discovered are about 1.4 million cartridges containing 10 mL of electronic cigarette juice,” Salceda said.

“The product is declared as freebase, which should be taxed at P60 per mL, but there are reports which suggest that the products themselves may be misdeclared and that they should, in fact, be taxed as nicotine salt, the more highly concentrated product, which is taxed at P52 per mL,” Salceda added.

Salceda also pointed out that FLAVA’s own marketing “reveals hints that it is, in fact, salt nicotine.”

“For a 10mL equivalent, the most dominant nicotine salt product in the market can provide 2800 puffs. FLAVA markets itself to provide 6000 to 10,000 puffs. So, by this alone, you could imagine that the product is concentrated,” Salceda said.

“This could thus be a case of P728 million in evaded taxes. If you multiply that by 10, this ends up being a P7.3 billion case,” Salceda added.

Salceda also requested that the Department of Finance and the Bureau of Internal Revenue come up with strategies to curb illicit trade in electronic cigarettes.