This e-cigarette brand could get slapped with P728-M tax evasion case, Salceda claims

Albay 2nd district Rep. Joey Salceda (Rep. Salceda’s office)

The House Committee on Ways and Means will soon hold an inquiry on what could end up as a P728-million tax evasion case involving the e-cigarette label FLAVA.

This was announced Friday afternoon, Nov. 10 by committee chairman Albay 2nd district Rep. Joey Salceda after learning of a raid late last month at a warehouse containing illegally imported e-cigarettes bearing the label.

The Oct. 27 raid resulted to a haul of 1.4 million pieces of 10-milliliter (mL) disposable vape pods.

The value of the items was pegged at P1.43 billion, with what Salceda estimates to be as much as P728 million in evaded excise taxes.

“We will investigate the matter as soon as possible, to see the extent of the fraud and tax evasion. If this is just one warehouse, imagine how much the value of evaded excise taxes must have been over its entire operations,” he said.

“If found liable of excise tax evasion, the excise tax due is subject to a penalty of 10 times the amount. That’s under Section 263 of the Tax Code. So, really, on the warehouse raid alone, you could be looking at a penalty of P7.28 billion. Once we factor in all past offenses, the amount could be staggering,” he noted.

According to Salceda, it appears that the label has also been misdeclaring its products as freebase vape rather than salt nicotine, as the latter is taxed at a higher rate.

Under Republic Act (RA) No.11467, salt nicotine vape is taxed at P52 per mL, while freebase is taxed at P60 per 10 mL.

“We have received reports of independent testing which appears to confirm that one of FLAVA’s products, Chillax, contains high concentrations of nicotine salts. If that is the case, then they have been paying just about one-tenth of what they should be paying in excise taxes for those products,” he explained.

“We have also been looking into other violations, including brazenly labelling their products to appeal to minors, in complete contravention of the ban against fancy flavoring,” Salceda added.

“We have also been scanning their online presence. Indeed, it appears that there is no attempt at a subdued marketing of its product’s flavors. Among all the prominent vape labels, they appear to have the most egregious attempts at marketing their products to a younger audience,” he further said.

The Salceda panel will also be looking at the company’s Bureau of Internal Revenue (BIR) registrations. “Vape products have tax stamp requirements, and there are allegations that FLAVA has in fact not been compliant,” he noted.

He pointed out that 80 percent of revenues from vape sin taxes are spent toward universal health care and government hospitals.

“So, the health impacts of smoking vapes aside, tax evasion in this product is stealing from our hospitals and our sick,” the Bicolano said.

Salceda is the principal author of RA No.11467 or the Vape Tax Law.