On Aug. 11, the tobacco and vape industry turned out in full force at a House Ways and Means Committee hearing on vape tax bills, armed with the same arguments it has repackaged for the past few years and echoed around the world: taxes on tobacco should be kept low, and high taxes have caused illicit trade. The trickster corollary holds that lowering taxes will deter illicit trade. As this column argues, the opposite follows — lower taxes will commonsensically increase smoking demand while perversely producing less revenue for the government. Lowering taxes is not an instrument to defeat illicit trade, especially in a country where the policy debate is still shaped by the competing demands of public health, revenue collection, and industry lobbying.

Bills seeking a P10/mL rate

A group of congressmen, mostly representing tobacco-growing provinces, have filed proposals for a P10/mL rate for both freebase and salt nicotine e-cigarettes — radically lowering the salt nicotine rate from P60/mL while only token-raising the freebase rate from P6/mL. These are the basis of House Bills (HB) 5207, 5212, 5364, and 69903, filed by Reps. Kristine Singson-Meehan, Ferdinand Hernandez, Rufus Rodriguez, and Bambi Amano, respectively. They justify this effective lowering of the salt nicotine rate by claiming that illicit trade is too high, and that vape products are less harmful than cigarettes and should be taxed accordingly.

The Philippine Tobacco Institute, for its part, proposed a pause in the annual price indexation of tobacco taxes. The measure revives what health advocates call the Sin Tax Sabotage Bill, which the House of Representatives (HoR) passed in the previous Congress. Had it become law, it would have meant two million new smokers and forgone revenues of at least P376 billion over 10 years. Fortunately, the HoR bill was rejected by the Senate, thanks to Senator Win Gatchalian's strong objection.

The industry's arguments must instead be examined on the basis of what the country really needs, the authors write: well-designed and well-implemented tobacco and nicotine taxes that reduce consumption, prevent Filipinos from developing a nicotine addiction, generate revenues for healthcare, and complement — not substitute for — strong enforcement against illicit trade. The country must relentlessly combat illicit trade, but it must likewise expose the tobacco industry for deceitfully using the illicit trade argument to fatten its profits at the expense of public health and tax revenues.

Enforcement, not low taxes, is the issue

An Action for Economic Reforms and Economics for Health study conducted in June 2024 showed that the main driver of illicit trade in the Philippines was not high tax rates but weak enforcement — exemplified by the stark differences in illicit trade prevalence between Mindanao (as high as 96%) and Luzon, the Visayas, and Metro Manila (as low as 0%). The evidence shows that where enforcement is strong and consistent, illicit trade is tamed; where institutions are weak and enforcement is remiss, illicit trade is severe.

Attacking illicit trade therefore requires stronger enforcement of rules and whole-of-society coordination. Strengthening regional collaboration and collective action is also critical, and the most effective intervention is to stem the smuggling of tobacco at its source. Fighting illicit trade through enforcement complements high tax rates; these complementary actions protect tax revenues and safeguard health objectives.

Rejecting the industry's claims

Congress, the authors argue, must reject the fabrications being advanced by the tobacco industry. At the Aug. 11 hearing, Eric Castillo of the policy group Caps and Partners said that "Higher tax rates do not automatically translate into better public health outcomes." That, the authors contend, is a blind and biased view not supported by the evidence. Higher taxes translate into a fall in demand for harmful products like vapes and cigarettes, and tobacco taxes do not work in isolation — they require consistent and credible tax administration and non-tax tobacco control measures.

The industry's duplicitous argument conveniently leaves out the robust body of evidence — from the World Health Organization, the Department of Health, health journals, and other academic studies — showing that higher tobacco taxes are the most cost-effective and efficient way to reduce tobacco consumption. The Philippine case is recognized as global best practice: the 2012 Sin Tax Reform Act cut smoking prevalence by a third and increased the budget for health at least four-fold in less than 10 years, illustrating how tax policy can affect both consumption and public financing when implemented consistently.

The economics of taxing harm

Health taxes differ from other government fundraising mechanisms in that they are designed to address the costs imposed by harmful consumption. Thus, barring political economy constraints, it still makes economic sense to tax cigarettes and vapes at the highest possible rate — drastically cutting smoking and sharply bringing down the economic cost of smoking-related diseases. The net effect is positive, given that the economic burden of smoking is so massive that tobacco and vape excise taxes are but a tiny portion of compensation for the total economic cost.

Current tax rates for tobacco and vape, however, remain far from the optimal rates. Illustrating this with vape products, the authors use the Tobacco Excise Tax Simulation Model (TETSIM), developed by the Research Unit on the Economics of Excisable Products at the University of Cape Town. Their simulation exercise yields an optimal vape tax rate of P292 per mL. The current highest rate — for nicotine salt — is just above P60 per mL, yet the tobacco industry and its allies in Congress have the temerity to want to reduce an already low rate to P10/mL.

The "95% less harmful" claim

The vape industry also used the Aug. 11 hearing as a propaganda platform to claim that vapes are 95% less harmful than cigarettes — the excuse for keeping vape tax rates below tobacco's. The "95% less harmful" claim is one of the industry's most frequently repeated factoids, and one of its most deceptive statements.

The figure originated from a 2014 multi-criteria decision analysis (MCDA) by David Nutt, et al., based on a meeting of a group of 12 self-appointed experts, several of whom had financial links or interests with the tobacco industry. In that MCDA, the 12 experts themselves chose the products to be evaluated, defined the risk criteria, and ranked the products according to the criteria — a majority of which were not health-related. Citing the study as established scientific truth is highly irresponsible, the authors argue: its methodology was highly arbitrary, there was a clear conflict of interest, and evidence in the decade since its publication has clearly refuted its claims.

Contrary to the 95%-safer myth, a 2026 meta-analysis by Glantz and Oliveira da Silva comparing disease outcomes of cigarette smokers with e-cigarette users shows that there is no detectable difference in the odds of disease for current e-cigarette users compared to cigarette smokers. A still harmful product claiming not to be equally harmful as cigarettes must therefore still be subject to a stiff tax. For one thing, the evidence shows that initiation to vaping is a pathway to smoking tobacco products, and the industry is marketing harmful products to non-smokers, especially the youth. For another, as noted above, evidence is emerging that no "detectable difference in the odds of disease" can be found between e-cigarette users and cigarette smokers.

The precautionary principle must apply, especially in the face of growing evidence of the serious harm caused by vape products. For decades, society waited for overwhelming evidence of the long-term consequences of smoking before treating tobacco as an enormous public health crisis; that mistake should not be repeated with e-cigarettes, heated tobacco products, and novel tobacco products. Given that vape products are addictive, aggressively marketed, and increasingly accessible to young people, the industry should not be given the benefit of the doubt. This will be paid for in young Filipino lives.

Tax vapes and cigarettes alike

The public health objective of tobacco taxes is for people to quit both smoking and using e-cigarettes, since both products are harmful to health. Because they are close substitutes — consumption of one encourages consumption of the other — they must be taxed the same for the tax to be effective in nudging users to quit. Government should not wait for a generation of Filipino children to develop chronic disease before deciding that vape products should not be cheap and accessible.

The ultimate measure of a successful tobacco tax is not to protect the industry's sales and profits, the authors conclude. It is to protect the population, particularly the Filipino youth, from using nicotine; enable current smokers and vapers to quit; and reduce healthcare costs and the economic burden from smoking.

It is in this spirit that the authors strongly support unifying vape taxes by raising them to the highest possible level. In the House, the vape tax rates are highest in Rep. Miro Quimbo's HB 1316 and Rep. Kenneth Gatchalian's HB 2618, at P61.425 and P66.15 per milliliter respectively for both freebase and nicotine salt vape products. The Ways and Means Committee should use these rates as a baseline, and even strive to raise them higher, to secure the government's revenue and health objectives.

Filomeno Sta. Ana III coordinates Action for Economic Reforms; Pia Rodrigo and Gage Andal are researchers of Action for Economic Reforms.