MANILA, Philippines — Government excise tax collection has steadily decreased since 2022, yet the circulation of illegal cigarette products have only increased since then.
Sen. Sherwin Gatchalian on Thursday, January 9, led the Committee on Ways and Means panel hearing on the illicit trade of excisable products, which include tobacco products.
Related Stories
“My worry is a reversal in smoking prevalence trends. We previously had a win-win situation where smoking prevalence was decreasing while tax collection was increasing. However, the trend has now reversed. We are now in a lose-lose situation with smoking prevalence rising and tax collection declining,” Gatchalian said.
During the hearing, the Bureau of Internal Revenue (BIR) presented the data on the excise tax collection.
According to the BIR Excise Large Taxpayers Service Office, excise tax collection was on an uptrend for a decade.
From 2010 to 2021, excise tax collection increased from P31 billion to P176.48 billion. However, 2022 marked the beginning of a decline.
In 2023, excise tax collection was P134.91 billion, with the 2024 collection tentatively at P134 billion.
“One of the reasons why there was a decrease [in] excise tax collection is the change in consumption pattern of those smokers from using traditional tobacco or cigarette to vape. This was shown in a survey conducted by FNRI (Food and Nutrition Research Institute). And another one is, of course, illicit trade,” Excise Large Taxpayers Service Office revenue executive assistant Dondanon Galera said in the hearing.
The Department of Health, represented by Undersecretary Kenneth Ronquillo, reported that the number of smokers has increased in recent years..
Citing data from the FNRI, Ronquillo said that the number of adults (ages 20 to 59 years old) who are currently smoking has increased since 2012, going from 19% to 24.4% in September. Ronquillo said that this was likely due to vape products.
Gatchalian also pondered if the illegal trade of smoking products also helped drive this increase.
Citing data from market research firm Euromonitor, Gatchalian said that the share of illegal cigarette products in the market has grown.
In 2020, illegal cigarette products took up 11.5% of the trade. This has steadily increased to 19.8% in 2023.
This translates to 11 billion of the 55.6 billion cigarette sticks out there being illegal.
“In my opinion, enforcement is not enough. We have to look at the other causes of illicit trade in our country. We cannot ignore the theory of incentives given the significant price difference between illicit cigarettes and legitimate ones,” Gatchalian said.