Report flags possible tobacco industry's role in illicit PH cigarette trade

A global tobacco industry watchdog has raised concerns that practices linked to major tobacco companies may be contributing to the illicit cigarette trade in the Philippines, challenging industry claims that higher tobacco taxes are the primary driver of illegal sales.

In a report released on February 4, watchdog group STOP said evidence from recent research suggests that registered cigarette brands are being sold without proper tax stamps and at prices too low to meet legal tax requirements—pointing to possible tax evasion and supply-chain leakages.

Titled “Complicit in Illicit? Tobacco Industry Tactics in the Philippines,” the report found cigarette packs bearing leading brands being sold in formal retail outlets without valid tax stamps, including missing or counterfeit stamps.

Such stamps are required to prove that excise taxes have been paid before cigarettes are sold to consumers.

The report cited packs bearing the names of two industry-leading brands, but it remains unclear whether the packs were legitimate or counterfeit.

STOP said the findings raise questions about whether tobacco companies are effectively controlling their supply chains.

Researchers also found registered cigarette brands being sold below the legal minimum price—some under P71.42, the level at which excise and value-added taxes could plausibly be paid.

According to the report, such pricing suggests possible tax evasion, increases cigarette affordability, and deprives the government of revenue.

The findings directly challenge the tobacco industry’s long-standing argument that higher tobacco taxes fuel illicit trade.

STOP pointed out that tobacco taxes are uniform nationwide, yet levels of illicit trade vary widely across cities and regions, indicating that factors such as weak enforcement, governance gaps, and corporate pricing strategies may play a larger role.

An empty-pack audit conducted by Action for Economic Reforms across sari-sari stores further showed that more than 90% of cigarette packs collected were registered with the Bureau of Internal Revenue, underscoring the dominance of major tobacco firms in the Philippine market rather than unregistered or unknown products.

“Increasing tobacco taxes has helped reduce smoking rates in the Philippines, so it is not surprising that the industry is trying to reverse these measures,” said Jorge Alday, director of STOP at Vital Strategies.

“Independent research shows that tobacco taxes are not the main driver of illicit trade and suggests the industry itself may be part of the problem,” he added.

Public health advocates warned that rolling back tobacco taxes—an idea periodically pushed by the industry—could reverse gains achieved under the Sin Tax Reform Act, keeping cigarettes affordable, encouraging youth smoking, and worsening health inequities.

The Philippine government collected P134.52 billion in tobacco taxes in 2024, with a substantial portion earmarked for health programs, including universal healthcare.

However, the Bureau of Internal Revenue has estimated that the country lost P25.5 billion in tax revenues in 2023 due to illicit tobacco trade.

The report also cited global evidence showing how tobacco companies can benefit from illicit trade by keeping prices low, weakening health warnings, and using the existence of illicit markets to argue against stronger tobacco control policies.

It further noted that companies have engaged in “overshifting,” or raising prices beyond tax increases, allowing them to boost profits even as smoking rates decline.

Dr. Allen Gallagher, co-director of the Tobacco Control Research Group at the University of Bath, urged governments to be wary of industry-backed narratives.

“This report highlights the need for stronger enforcement—not lower tobacco taxes—to address illicit trade,” Gallagher said.

He added that ratifying the Protocol to Eliminate Illicit Trade in Tobacco Products and implementing an independent track-and-trace system would help authorities trace illegal products and ensure taxes are fully collected.

STOP said stronger enforcement, supply-chain transparency, and independent monitoring are critical to curbing illicit trade without weakening tobacco tax policies that have been proven to reduce smoking and fund public health services.—MCG, GMA Integrated News