The Demand For Cigarettes in The Philippines Is Declining, And The Rise Of Electronic Cigarettes Makes It Difficult For The National Taxation Bureau To Achieve Its Tax Target Of 6.3 Billion US Dollars

The demand for cigarettes in the Philippines is declining, and the rise of electronic cigarettes makes it difficult for the National Taxation Bureau to achieve its tax target of 6.3 billion US dollars

Due to the declining demand for tobacco and consumers turning to e-cigarettes, the Philippine Internal Revenue Service (BIR) is expected to miss this year's $6.3 billion consumption tax target, while the illegal tobacco trade has also resulted in a potential loss of $120 million in revenue for the authorities.

According to Bworld Online on October 20th, due to the declining demand for tobacco products, the Philippine Internal Revenue Service (BIR) will not be able to achieve its consumption tax target of 362.2 billion Philippine pesos (approximately 6.3 billion US dollars) this year.

Jethro Sabariaga, Assistant Commissioner of BIR, stated that tobacco consumption tax accounts for over 40% of the national consumption tax revenue. However, in the past decade, tobacco consumption has continued to decline.

Nowadays, it is rare to see people smoking, and the shift in market demand can be felt intuitively

He also added that the increase in taxes on other taxable goods cannot compensate for the decline in tobacco consumption tax.

The shift of consumers towards electronic cigarette products has also had an impact on the authorities' consumption tax revenue. According to the commissioner, the consumption tax on an electronic cigarette is equivalent to the tax on a pack of cigarettes, but electronic cigarettes often consume more slowly.

If a smoker turns to e-cigarettes, typically consuming 10 to 15 packs of cigarettes per month, they may only buy one e-cigarette product, or even worse, only buy one every two months

Previously, the Director of BIR, Romeo D. Lumagui, pointed out that the illegal tobacco trade also poses challenges for the authorities in collecting consumption taxes. In the first half of 2024, the agency lost approximately 7.2 billion Philippine pesos ($120 million) in potential revenue due to seized tobacco and electronic cigarette products.

In the eight months ending at the end of August, BIR collected a consumption tax of 194.93 billion pesos (3.4 billion US dollars), with tobacco product revenue of 84.42 billion pesos (1.5 billion US dollars), accounting for 43.31% of the total consumption tax.