By Isa Jane D. Acabal, Researcher
The PHILIPPINES lost approx P141 billion in government revenue from illegal tobacco trade in 2024 and 2025, with illegal vape products emerging as the biggest source of tax leakage, according to a report by the EU-ASEAN Business Council (EU-ABC) and Euromonitor International Ltd.
The Philippines posted the third-highest financial loss among the six Southeast Asian countries included in the survey, behind Indonesia and Malaysia, according to a report released Monday.
The financial loss of the Philippine government reached about $2.46 billion over the two-year period, made up of about $2.06 billion from illegal cigarettes and $400 million from illegal e-vapor products.
“The continued growth of the illegal tobacco trade in ASEAN (Association of Southeast Asian Nations) and the Asia-Pacific region reflects the displacement of the legal market, while increasing the challenges of control, enforcement and reducing financial contribution,” the council said in a 43-page report.
This study included the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam, together called ASEAN-6. It examined the extent of illegal trade involving cigarettes and e-vapors, including illegal, counterfeit, illegal whites, untaxed products and unbranded cigarettes.
Among the countries surveyed, the Philippines posted the highest revenue loss tied to illegal e-vapes. It also had the highest incidence of illegal vape products among markets where e-vapors are legal.
The report estimates that 85.6% of e-vapes sold in the Philippines last year were illegal products.
Meanwhile, illegal cigarettes account for 25.3% of the domestic market, much higher than the ASEAN-6 average of 16.1%.
Across Southeast Asia, governments are estimated to lose a combined revenue of $13.07 billion in 2024 and 2025 due to the illicit tobacco trade.
The report expects the illicit tobacco market in ASEAN-6 to grow further, with the incidence of illicit trade expected to rise to 27.8% in 2028 from 23.6% in 2025.
Researchers have warned that increased illegal tobacco trade could reduce government revenue, harm legitimate businesses and increase risks for consumers.
This affects government income and welfare programs, reduces the profitability of legitimate businesses, supports illegal activities in the market and poses health risks to consumers, said the EU-ABC.
EU-ABC Executive Director Chris Humphrey said the illegal tobacco trade takes money out of the formal economy and reduces the region’s attractiveness to investors.
“Here in the Philippines, the National Calamity Fund could easily be funded if we could stop the illegal tobacco trade and [collect the proper taxes] from it,” he separately told the news conference
He added that the problem goes beyond the tobacco industry because widespread illegal trade creates unfair competition and discourages investment in all sectors.
“It reduces the attractiveness of the region to invest not only in tobacco, [but]… and in other fields,” he said.
‘GOOD ASSURANCE’
Firdaus Muhamad, head of consulting for the Asia-Pacific region at Euromonitor, said the increase in tobacco taxes, pressures on the inability to cover costs and expansion. the price gap between legal and illegal products continue to fuel the demand for illegal products.
“The common trap in this story we are talking about is the pressures of not being able to pay,” he told the forum. “The annual tax increase and the illegal price gap create an environment for other illegal products to compete.”
He added that illegal operators can still raise prices while remaining cheaper than legal products, allowing illegal traders to maintain or increase profit margins.
EU-ABC estimates that illegal tobacco operators in the Philippines will earn an estimated $2.2 billion from the illegal trade in 2024 and 2025.
To solve this problem, Mr. Humphrey called for stronger regional cooperation, especially among ASEAN countries with open world borders.
He said governments should strengthen cooperation in Customs enforcement and develop digital tracking systems to better monitor tobacco products at borders.
Filomeno S. Sta. Ana III, the coordinator of Action for Economic Reforms, said that the enforcement of the law is still very much an effective way to combat illegal trade.
“The most important step is to properly implement the law,” he said by phone, noting that the Bureau of Internal Revenue, Bureau of Customs and local governments should continue to strengthen anti-trafficking operations.
The report also noted that outright bans on electronic cigarettes and vape products have not eliminated illegal trade in countries where such restrictions are in place.
Mr. Sta. Ana noted that while the ban can reduce legal sales, it can also increase underground markets if law enforcement remains weak.
