E-cigarette firm faces raps over tax evasion

The fate of Flava Corporation Philippines, a prominent e-cigarette firm embroiled in allegations of tax evasion, hangs in the balance as a House panel considers the potential pursuit of criminal charges, casting a shadow of uncertainty over the company's future.

Cagayan de Oro Rep. Rufus Rodriguez, during the second hearing of the House Committee on Ways and Means on Tuesday into the seizure of P1.4 billion worth of e-cigarettes marked "Flava" in October, cited "enough" testimonies and documentary evidence that may serve as grounds into the potential sanctions.

"I strongly feel that there are responsible people here. So, our recommendation will now be part of the filing of the Bureau of Customs and the BIR (Bureau of Internal Revenue). We have to bring them to court so that there they can present everything but prima facie, there [is] now evidence that there are people responsible for importation and non-payment of customs duties and also excise tax evasion," Rodriguez said.

The congressional inquiry was prompted by BoC's seizure of roughly 14,000 boxes or about P1.43 billion worth of Flava brand e-cigarettes or vapes — allegedly smuggled — in a warehouse inspection in Valenzuela Flava in late October.

The seizure highlights Flava's possible evasion of excise tax, a critical revenue stream for the government, according to Rodriguez.

Citing an independent testing report obtained by his office, Rodriguez previously said that Flava has mislabeled its products, claiming they contain "freebase nicotine" instead of "nicotine salt" to reduce tax payments.

Both Rodriguez and the panel's chair, Albay Rep. Joey Salceda, urged the Department of Trade and Industry to issue a directive to online e-commerce platform Lazada to seize from selling Flava and pull out its advertisements to its market.

Salceda posits that stocks in the warehouse could be a case of P728 million in evasion of excise tax and P84 million in value-added tax.

"At this point, DTI, can you please tell Lazada that it is improper to sell? Shopee, upon the request of this committee, followed. There is no vape in Shopee, but on Lazada, there is so," Salceda said. "Let me just repeat this request to DTI that Lazada should stop selling."

Rodriguez echoed Salceda's call, saying the e-cigarettes are also being illicitly sold to minors, constituting a further infringement.

"As of now, I have checked Flava e-cigarettes are still on the market. And so, in spite of all that is being done here, Flava continues to sell online. We also urge the DTI to tell Shopee to continue its non-sale of online of the flava products," Rodriguez said.