Illicit trade has reached a record high in the Philippines, with one in five cigarettes sold in the country being untaxed and unregulated, a trade group said, raising alarms about significant revenue losses for the government and negative impacts on public health and legitimate businesses.
The Philippine Tobacco Institute (PTI) said that because of illicit trade, the government’s excise revenue from tobacco dropped to P134 billion in 2024 from P176 billion in 2021.
“One in every five cigarettes sold today is untaxed and unregulated,” PTI president Jericho Nograles said in a forum on combating illicit tobacco trade. He said the illicit trade has reached an all-time high and was approaching “irreversible levels.”
Nograles said the lost revenue, estimated at P21 billion, would otherwise go to the country’s health system, specifically PhilHealth.
“This is not a problem at the fringes anymore. It is now the dominant market in many areas in the country, despite commendable efforts of the Bureaus of Customs and Internal Revenue,” he said.
Beyond financial losses, Nograles noted the adverse effects on small businesses and employment. “When legal retail goes down, that means the retailers will probably close shop,” he said, which would lead to a loss of business taxes for local government units and reduced employment.
Atty. Karry Sison, convenor of advocacy group Bantay Konsyumer, Kalsada, Kuryente (BK3), which organized the forum, called the illicit trade a “full-blown crisis” affecting the youth.
Sison pointed to a sharp rise in smoking prevalence from 18.5 percent in 2021 to 23.2 percent in 2023, attributing it partly to the availability of cheap, likely illegal and unregulated products. More alarmingly, youth smoking surged to 23.2 percent in 2023, with adolescent vape use jumping from 7.5 percent to nearly 40 percent in the same period, she said.
Many illicit tobacco products are flavored, unregistered and chemically unverified, Sison said. “This means that children are exposed to unknown substances, which are sold in plain sight. Doctors are already seeing 16-year-olds with chronic obstructive pulmonary disease (COPD)—an illness once only seen in the elderly,” she said.
Jethro Sabariaga, assistant commissioner of the Bureau of Internal Revenue (BIR), said manufacturers were also suffering due to the illicit trade, particularly from “illicit whites”—or cigarettes produced by criminal enterprises and sold without proper duties paid outside their jurisdiction of production.
“The profit margin is high, not just from the tax side, but from the products itself,” Sabariaga said, noting that a pack of illicit whites could sell for P40 compared to P120 for a legal pack, where P60 accounts for tax. “It’s not just the tax that they’re cheating, but also the manufacturing costs,” he said.
Sabariaga said the BIR is strengthening the information exchange among agencies to combat the illicit trade, especially amid reports that some local manufacturers declare exports but their products end up in the domestic market as illicit whites.
Juvymax Uy, deputy commissioner for the Intelligence Group of the Bureau of Customs (BOC), identified Malaysia and Indonesia as sources of illicit cigarettes entering the Philippines through southern borders. Uy stressed the crucial role of local government units in combating the “blatant selling of illicit cigarettes” in island provinces.
