The House of Representatives Committee on Ways and Means has called on the Department of Trade and Industry (DTI) and the Bureau of Internal Revenue (BIR) to immediately cancel the business permit and manufacturing license of vaping company Flava Corp.
The committee, chaired by Albay Rep. Joey Sarte Salceda, made the recommendation in light of alleged violations of the country’s vaping law aimed at protecting minors.
In a congressional hearing, the panel approved the committee report after a series of congressional investigation on Flava’s alleged string of offenses—including tax evasion and sale of flavored vapes to minors prohibited by Republic Act (RA) 11900, or the Vaporized Nicotine and Non-Nicotine Products Regulation Act.
A popular vape brand, Flava, has been found aggressively marketing its
vaping devices to minors through social media in violation of the law.
“The DTI should revoke the business license and permit of Flava Corporation for violations of RA 11900. The DTI should conduct surveillance and initiate the confiscation and removal of all Flava vapor products and electronic cigarettes from the market,” the committee report stated.
Salceda also urged the Securities and Exchange Commission (SEC) to
investigate Flava for fraudulent conduct of business, a violation of the Revised Corporation Code.
The panel also found that despite Flava’s separate registration with the BIR as a manufacturer, the company had instead been importing from China the vaping products it sells in the Philippines.
Flava’s executives have claimed that they only imported vapes through Denkat Trading Corp., which is said to be the biggest vape distributor in the country. However, Denkat had denied importing on behalf of Flava.
Cagayan de Oro City Rep. Rufus Rodriguez had estimated up to P728 million in foregone tax revenues from the alleged technical smuggling of P1.43-billion worth of illicit Flava electronic cigarettes last year.
Due to tax evasion which violates the National Internal Revenue Code (NIRC) or the Tax Code, “the Committee also recommends that cases be filed fining Flava Corporation under Section 263 of the NIRC.” The Tax Code slaps a fine not less than 10 times the amount of unpaid excise taxes but not less than P1 million, plus five to eight years of imprisonment for tax evaders.
This could allow the government to raise up to P7.2 billion in taxes and fines.
The BIR should also stop the sale of all Flava vapes, according to the Salceda committee.
“Under Section 23 of RA 11900, ‘the BIR shall order the immediate recall, ban or seizure from public sale or distribution of vaporized nicotine and non-nicotine products or novel tobacco products not registered with the BIR, including those sold online,’” the committee report pointed out.
“Any imported Flava Corporation e-cigarette cannot be properly considered ‘registered with the BIR’ and is therefore subject to recall, ban, and seizure,” it further noted.
Aside from the BIR, Salceda also urged the Bureau of Customs (BOC) to file a smuggling case against Flava, and conduct a post-clearance audit on the importers it had partnered with.
Rodriguez hinted that the BOC should also file criminal cases against the importers implicated in Flava’s smuggling activities— Denkat and TopKing Corporation, as well as these firms’ officers.
“They are in conspiracy with Flava. They assisted Flava in engaging with the exporter from China and bringing in products confiscated by the BOC,” Rodriguez said.