MANILA – The Philippine Tobacco Institute (PTI) on Thursday outlined several recommendations to comprehensively address the illicit tobacco trade that adversely affects tobacco farmers and revenue collections.
During a public hearing of the Senate Committee on Ways and Means, PTI president Jericho Nograles cited Euromonitor estimates showing that illicit tobacco products could account for 19 percent of the domestic market this year.
He noted that Mindanao is the hardest hit, with 51 percent of cigarettes sold being illicit, and some of its areas exceeding 90 percent.
Meanwhile, Northern and Central Luzon reported a 12.8 percent incidence, and Southern Luzon, 5.4 percent.
“Illicit trade thrives due to the availability of untaxed cigarettes sold at a fraction of the price of legitimate products. Legal cigarettes are up five times more expensive than their illicit counterparts. This price disparity is fueled by illegal importers, manufacturers, and traders who evade excise taxes,” Nograles told the panel.
While he acknowledged the efforts of such agencies as the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), and Department of Trade and Industry (DTI) in seizing illicit products and shutting down illegal factories, he emphasized that more must be done to address illicit tobacco trade comprehensively.
The recommendations made by PTI include:
1. Revisit the tax system to determine the optimal tax rate that achieves the dual objectives of raising revenue and discouraging tobacco consumption while minimizing unintended consequences;
2. Impose a single excise tax rate for all vapor products to ensure clarity and consistency in implementation and collection;
3. Adopt a whole-of-government approach to enforcement involving not only the BOC, BIR, DTI, and other law enforcement agencies but also enjoin local government units (LGUs) and other relevant agencies;
4. Direct the Department of Agriculture to recommend that the President convene the Anti-Agricultural Smuggling (AAS) Council for the effective implementation of the new AAS Law;
5. Ensure that the Department of Justice aggressively prosecutes illicit importers, manufacturers, and traders of tobacco products;
6. Mobilize the Anti-Money Laundering Council to take decisive action against smugglers;
7. Develop and implement an effective track and trace system to monitor the supply chain of tobacco products; and
8. Launch a public awareness campaign to educate citizens on the social and economic costs of purchasing illicit tobacco products.
“The tobacco industry remains a cornerstone of the Philippine economy. But we must act decisively to combat illicit trade, which threatens livelihoods, public health funding, and government revenues,” Nograles said.
Meanwhile, the BIR reported to the panel that it conducted 41 enforcement activities against vapor products from January to December 2024, seizing more than PHP64.164 million worth of illicit vapor products and PHP342.407 million in illicit cigarettes.
On the other hand, the BOC reported 318 seizures of illicit vapor and cigarette products amounting to PHP9.19 billion last year.
The tobacco sector supports 41,000 farmers and produces more than 39 million kg. of leaf tobacco annually.
It also employs more than two million Filipinos across production, distribution, and marketing, with excise taxes from tobacco contributing 54 percent of the budgets for the Department of Health and the Philippine Health Insurance Corp. (PhilHealth).
Senator Sherwin Gatchalian, who chairs the panel, clarified that the panel is focusing on tobacco products, heated tobacco products, vapor products, and cigars and cigarettes, which are experiencing high levels of illicit trade.
“As we all know, illicit trade goes under the radar of any government regulation or any government enforcement agency and that creates a lot of health problems, as well as foregone revenue or leakage in a revenue collection,” Gatchalian said. (PNA)