Weak enforcement and government lapses, not high tobacco taxes, are the main drivers of the illicit cigarette trade in the Philippines, according to a new nationwide study released by Action for Economic Reforms (AER) and Johns Hopkins Bloomberg School of Public Health’s Economics for Health.
The research, based on surveys of over 1,000 sari-sari stores and an audit of more than 7,500 cigarette packs across eight key cities, concludes that weak enforcement and governance gaps are the primary factors behind smuggling. The findings directly challenge the tobacco industry’s narrative that high taxes cause the illicit trade.
The study showed that Southern Mindanao, particularly the cities of Zamboanga and General Santos, has the highest incidence of illicit cigarette sales due to lax enforcement and proximity to smuggling routes.
In Zamboanga City alone, nearly 80 percent of packs were priced below applicable taxes, while up to 96 percent of inspected packs had fake or missing tax stamps. In contrast, the prevalence of illicit cigarette sales in Luzon Visayas and Metro Manila was found to be low.
“The results disprove the tobacco industry’s narrative that high taxes cause smuggling,” said AER lead researcher for the study, Daffodil Santillan.
“The evidence shows the real issue is weak law enforcement and regulatory oversight, especially at ports and borders. Lowering tobacco taxes will only make cigarettes cheaper and Filipinos sicker,” said Santillan.
The AER urged the government to reject proposals to lower tobacco excise taxes. To combat illicit trade, the organization called for measures including a modern track-and-trace tax stamp system, the licensing of all tobacco retailers, and stronger powers for the Bureau of Internal Revenue (BIR) to close non-compliant establishments.
Senator Risa Hontiveros, who chairs the Senate Committee on Health and Demography, also stressed the need for stricter implementation of existing regulations. Speaking at the launch of the “State of the Illicit Tobacco Trade in the Philippines 2025 Report,” Senator Hontiveros warned that the smuggling of untaxed cigarettes threatens public health and undermines the country’s Universal Health Care (UHC) program.
“This study affirms that stricter implementation of existing regulations and stronger policies, not tax cuts, are crucial in combating illicit tobacco trade,” Hontiveros said.
Experts at the report launch echoed Senator Hontiveros’ stance, saying that the problem is one of governance and enforcement, not high taxation.
