PH loses ₱141-B to Illicit Tobacco Trade in Two Years — Report

The Philippine government lost an estimated ₱141 billion ($2.46 billion) in revenues due to illicit tobacco trade, while operators involved in the illegal market earned about ₱136 billion ($2.21 billion) over two years — 2024 and 2025 — according to a report by the EU-ASEAN Business Council and Euromonitor International.

A new report found that illicit tobacco and vape products cost the Philippine government an estimated ₱141 billion in lost revenues over two years.

Titled “Inside ASEAN’s Illicit Tobacco Market: Data, Trends and Emerging Patterns,” the 43-page report covered six Southeast Asian countries — the Philippines, Indonesia, Malaysia, Singapore, Thailand, and Vietnam — collectively referred to as ASEAN-6.

The study assessed the scale of illicit trade involving cigarettes and e-vapor products, including contraband, counterfeit goods, illicit whites, untaxed products, and unbranded tobacco.

“Illicit tobacco (cigarettes and e-vapour) represents a significant percentage of tobacco consumption in ASEAN-6. At 23.6% in 2025, almost one in every four tobacco products consumed in the region is illicit,” the report said.

The figure is projected to rise to 27.8% by 2028, reflecting the growing scale of illicit tobacco trade in the region and its impact on government revenues, social welfare programs, legal businesses, and consumer health.

Southeast Asian governments collectively lost an estimated $13.07 billion in revenues in 2024 and 2025 due to illicit tobacco trade, according to the report.

The Philippines recorded the third-highest revenue loss from illicit tobacco after Indonesia and Malaysia.

Illicit cigarettes accounted for 25.3% of the Philippine market, significantly higher than the ASEAN-6 average of 16.1%.

Meanwhile, illegal vape products emerged as a major source of tax leakage. Of the Philippines’ estimated revenue loss, around $2.06 billion came from illicit cigarettes, while approximately $400 million was linked to illegal e-vapor products.

The report found that the Philippines posted the highest revenue loss from illicit e-vapes and the highest incidence of illegal vape products among markets where e-vapor products are legal.

An estimated 85.6% of e-vapes sold in the Philippines in 2025 were illicit products.

Firdaus Muhamad, head of consulting for the Asia-Pacific region at Euromonitor, said rising tobacco taxes, affordability pressures, and widening price gaps between legal and illicit products continue to fuel demand for illegal tobacco.

“The common trap in this story is affordability pressure. Annual tax increases and the legal-illicit price gap create room for illicit products to compete,” he said.

Firdaus noted that illicit operators can still raise prices while remaining cheaper than legal products, allowing illegal sellers to maintain or even expand profit margins.

He added that illicit tobacco products continue to proliferate because of lower prices, easier online access, weak supply chain controls, and porous regional trade routes that enable smugglers to move products with minimal detection.

“The decentralized nature of online sales makes it hard to crack down on illicit tobacco operations. Sellers can quickly shift between platforms, communication channels, and delivery networks to evade detection,” he said.

Chris Humphrey said illicit tobacco trade diverts money from the formal economy and undermines investor confidence.

“Here in the Philippines, the National Calamity Fund could easily be funded if we could stop the illicit tobacco trade and collect the proper taxes from it,” he said.

Humphrey added that the issue extends beyond the tobacco sector because widespread illicit trade creates unfair competition and discourages investments across industries.

To address the problem, he recommended stronger regional coordination, particularly among ASEAN countries with porous borders, as well as tighter customs enforcement and improved digital track-and-trace systems for monitoring tobacco products.