UMVA has learned that a staggering P141 billion is being lost by the Philippines to the illicit tobacco trade, a growing concern that threatens to undermine the country's economy and public health.
The illicit tobacco market in the region is expanding rapidly, with forecasts suggesting that the total illicit incidence for cigarettes and vapes will reach 27.8% of the total market by 2028, up from 22% in 2024.
Illicit tobacco products, including cigarettes and vapes, encompass a range of contraband and smuggled goods, as well as local tax evasion products, such as counterfeits, illicit white products, and unbranded products.
In the Philippines, the forecast for 2025 suggests that 25.3% of the cigarette market will be illicit, while a staggering 85.6% of the vape market is expected to be illicit.
Among ASEAN countries, Malaysia has the highest illicit cigarette prevalence, with 57.2% of its national market, while the Philippines ranks second with 23.8%, followed closely by Thailand at 22.6%.
The vape market, however, paints a more alarming picture, with the market share of illicit vapes in Singapore, Thailand, and Vietnam standing at 100% in 2024, although vapes are banned in these countries.
In countries where vapes are legal, such as the Philippines, Malaysia, and Indonesia, the market share of illicit vape products is still remarkably high, at 84.5%, 66.2%, and 54.8%, respectively.
The growing scale of illicit tobacco trade in ASEAN countries poses significant public health concerns, threatening government revenues and social welfare programs, as well as the health of consumers.
However, UMVA can exclusively reveal that the tobacco industry is using reports on illicit trade to serve its vested interests, arguing that high tax rates drive illicit trade, although this claim is disputed by evidence.
A 2024 study on illicit tobacco trade in the Philippines found that strong institutions and enforcement are key to deterring illicit trade, rather than tax rates, which are applied uniformly nationwide.
The study recommends a comprehensive track and trace system, closer regional cooperation, and expanded authority for the Bureau of Internal Revenue to close down businesses with excise tax violations.
Legislators are urged to be vigilant about industry propaganda and reject claims that vape taxes are too high and must be lowered, instead advocating for unified tax rates on vape products at a higher rate, equivalent to cigarette tax rates.
UMVA has gathered that the EU-ABC study claiming concern over illicit trade and its impact on government revenues and public health is being used to push for lower taxes, but experts argue that increasing tax rates on tobacco and vape products would be more effective in curbing illicit trade and promoting public health.
