Defying the odds

Every stick of smuggled cigarettes being sold on the street chips away at legitimate enterprise and public health. What may be a bargain price to the smoker who buys it cheaper, or so it seems, is multiple losses for our country’s economy in particular, and the Filipino people’s wellbeing in general.

The continuing smuggling and illicit sale of imported cigarettes of unknown origins are not only draining billions from government coffers. More worrisome, it is also reversing hard-won gains in harm-reduction in smoking rates and funding universal health care. Ironically, our country’s Universal Health Care (UHC) program largely gets funding from the so-called “sin” taxes collected from cigarette products and alcoholic drinks.

This is why not all tobacco manufacturers can be treated alike. There is a world of difference between those who comply with the law and contribute to national development, as against those who operate in the shadows, undermining both revenue collection and public health and welfare.

Smuggling of cigarettes in our country’s shores has been taking place non-stop. I should know because every day, when I do my daily line-up for the news desk, there are always seizures of smuggled cigarettes from Malaysia and Indonesia, most often taking place in our southern Philippine backdoor. Despite the Philippine government’s unrelenting campaign to stop the illicit cigarette trade, the smuggling attempts are still growing rapidly in recent years.

According to a Kantar study, cigarette smuggling incidents have, in fact, tripled from 7.4 percent of total cigarette volume in 2021 to 18.4 percent at the end of 2024. Volumes of smuggled tobacco products are estimated to reach 21 percent by this year-end.

In simple terms, one out of every five cigarettes sold in the Philippines is illegal, untaxed and unregulated.

The same study shows where this underground trade of smuggled cigarette thrives seemingly undisturbed. In Luzon, illicit tobacco is most prevalent in Bataan (63 percent of total cigarette volume); Palawan (35 percent); Pampanga (20.2 percent); Tarlac (17.5 percent) and Quezon province (16.9 percent).

In the Visayas, the top provinces are Negros Occidental (34.5 percent); Biliran (12 percent); Negros Oriental (7.4 percent); Bohol (6 percent) and Cebu (3.9 percent). In Mindanao, standing out as hotspots are Lanao del Sur (94.2 percent); Maguindanao (73.2 percent); Compostela Valley (69.6 percent); Sarangani (68.2 percent) and Misamis Occidental (64 percent).

Yet the country has one of the region’s most progressive excise tax regimes for tobacco. Republic Act (RA) 11346 imposes an annual five-percent increase in tobacco excise taxes. This law was precisely crafted to discourage cigarette smoking while at the same time sustaining public health financing. From P60 per pack in 2023, the tax has risen to P66.15 this year and will continue to climb up to P72.93 by 2027.

Take note, however, that excise collections from tobacco products have fallen sharply. From a high of P176 billion in cigarette excise taxes in 2021, government revenues dropped to just P134 billion in 2024, or a loss of P41 billion. The Bureau of Internal Revenue (BIR) said the declining excise tax collections from tobacco products are largely due to large-scale cigarette smuggling.

The BIR estimates smuggled and illegally manufactured cigarettes now deprive state coffers of at least P50 billion annually. Including projected shortfalls, total deficiencies in excise tax collections could reach P123.7 billion by the end of this year.

The human cost is just as troubling.

For the first time in 15 years, smoking prevalence is reportedly on the rise. From 18.5 percent of adults in 2021, it has gone up to 23.2 percent in 2023. Geez, if this further surges up, it could erase a decade of progress since the passage of the Sin Tax Law in 2012.

Even more alarming, youth smoking has doubled with the spread of illicit sale of vapes and unregulated e-cigarettes. The Food and Nutrition Research Institute (FNRI), an attached agency of the Department of Science and Technology, reported nearly 40 percent of young smokers now prefer these products. What compounds this problem, unscrupulous traders of vapes do not comply with quality or labeling standards.

Beyond lost revenue, illicit tobacco gravely undermines public health. Illicitly manufactured cigarettes and other tobacco products were found to contain toxic contaminants such as cadmium and lead. And – yucky! – some counterfeit cigarette makers allegedly add insect parts and even human waste.

Bound by laws, compliant legitimate manufacturers contribute to public health objectives and developing Reduced-Risk Products (RRPs) such as heated tobacco and oral nicotine pouches. These innovations align with global harm-reduction trends, providing adult smokers with safer alternatives while continuing to fund health programs through excise tax payments. Legitimate manufacturers are bound by quality control regulations that ensure product consistency and safety.

Moreover, the fight against illicit trade is a global effort. Smuggling networks have been linked to organized crime, corruption and even terrorism financing. In this context, legitimate manufacturers who invest, pay taxes and cooperate with authorities have become vital allies in defending fair trade and national security.

Legal tobacco companies sustain livelihoods across the value chain. They produce high-quality tobacco products for local and export markets, supporting thousands of jobs and contributing to the livelihood of the people. Some 2.2 million Filipinos depend on our local tobacco industry, from tobacco farmers and factory workers to retailers and transporters.

As part of their corporate social responsibility, on the other hand, these manufacturers conduct sustainability programs such as environmental and social-economic initiatives that uplift the lives of many.

Thus, when we speak of “tobacco products,” we must be precise. There is a vast moral, legal and economic difference between those that are manufactured and distributed legitimately and those that are not. Legitimate tobacco manufacturers uphold the rule of law, protect consumers and contribute to national development.

Illicit tobacco producers do the opposite: feeding nicotine addiction, cheating the public purse, endangering lives of the people and the public health system. The stakes are high yet they are as daring and greedy as smugglers of shabu in defying the strong odds of being caught. I wonder why.