BIR cuts floor price for cigarettes, vape products

MANILA, Philippines —  The Bureau of Internal Revenue (BIR) has reduced the floor price for cigarettes and vape products as the government took into account lower production costs of manufacturers.

In its latest revenue regulation, the BIR updated the floor prices for cigarettes, heated tobacco products and vaporized nicotine products. The BIR last issued its floor prices in May 2023.

Floor price is the minimum retail price set by the BIR taking into account the sum of the products’ excise tax, value-added tax (VAT) and reasonable production cost.

For cigarettes, the new floor price for a pack is now at P78.58 from the previous P114.60.

For heated tobacco products, the floor price per pack has been reduced to P60.11 from the previous P120.40 for those with production cost of P19.54, excise tax of P34.13, and VAT of P6.44.

Further, the BIR set a P180.67 floor price for two milliliter (ml) pod of nicotine. This was slightly lower than the P200 previously.

For a conventional freebase or classic nicotine, the floor price has been set at P181.72 for a 10-ml bottle with production cost of P99.25, excise tax of P63 and a VAT of P19.47.

A larger bottle of 30 ml classic nicotine, on the other hand, has also been priced lower at a minimum of P263.73 from a little over P400.

BIR assistant commissioner Jethro Sabariaga explained that the lower floor prices stemmed from manufacturers’ production costs.

“If the manufacturers reported a lower cost of production, that will reflect in floor price because floor price is simply cost to manufacture plus taxes,” Sabariaga told The STAR.

He maintained that the lower floor price would not significantly impact overall revenue collection for the agency.

“The impact will probably be in income taxes but there are a lot of variables in income taxes considering that the two biggest manufacturers are partners with foreign companies,” Sabariaga said.

“We are looking closely at passed on costs or transfer pricing implications. But when it comes to excise tax, it is all dependent on consumption and removal data,” he said.

BIR Commissioner Romeo Lumagui reminded sellers of cigarettes and vape products to not sell below the updated floor price.

This covers electronic marketplaces, online and retail sellers and distributors.

“Doing so would be a criminal violation penalized by imprisonment of the seller. We are monitoring both online platforms and brick-and-mortar stores,” Lumagui said.

The latest BIR regulation also reiterated penalties for violators selling at lower prices including fines of P200,000 to P500,000 and imprisonment of up to six years.