Lawmakers and law enforcement officials warned that the unchecked proliferation of the illicit tobacco trade is financing terrorist groups, including the Abu Sayyaf.
Senator Sherwin Gatchalian, chair of the Senate Ways and Means Committee, expressed alarm over the broader impact of illicit tobacco on government revenue and national security.
“Another consequence is that profits from illicit trade are reportedly being funneled into terrorism, making this issue not only an economic concern but also a threat to peace and order,” Gatchalian said in a recent committee hearing.
Citing an October 2023 report, Gatchalian pointed to findings from global security expert Rohan Gunaratna, who revealed that cigarette smuggling has become a lucrative source of income for armed groups in Mindanao.
“By not curbing illicit trade, it’s funding these terrorist groups who are wreaking havoc in our southern borders,” Gatchalian said.
Philippine Tobacco Institute President Jericho Nograles noted that while high tobacco taxes aim to reduce smoking and discourage consumption, they have also unintentionally created opportunities for illegal operators.
“The tax evader stands to gain as taxes increase,” Nograles said.
He highlighted the dangerous nexus between smuggling and terrorism, sharing insights from his research on the Anti-Terror Act. “I found that terrorism and smuggling go hand in hand,” he said.
“Cigarette smuggling, which has roots in Southern Mindanao, was also used for the smuggling of bombs and bomb paraphernalia. Cigarette smuggling would pave the way for other kinds of smuggling,” Nograles said.
Nograles referenced Euromonitor data, which estimates that illicit tobacco products could comprise 19% of the domestic market this year. He highlighted that in Mindanao, 51 percent of tobacco products sold are illicit, with some areas reporting rates exceeding 90 percent.
Tobacco excise tax collections also steadily declined from P176 billion in 2021 to P160 billion in 2022, P135 billion in 2023 and P130 billion in 2024.
Bureau of Customs Deputy Commissioner Juvymax Uy outlined several factors why illicit cigarettes continue to persist in southern Mindanao.
He pointed to the porous nature of the country’s borders, where local vessels lack mandatory automatic identification systems, making them challenging to monitor. He also said the country’s many private ports, which fall under the jurisdiction of local government units, remain poorly regulated.
Uy also confirmed the link between illicit cigarettes and terrorism. “In the island provinces, illicit cigarettes are a common sight in Abu Sayyaf camps. Nearly all cigarettes found in these camps are illegal,” he said.
“The people in the southern borders do not smoke the same cigarettes as those in urban areas,” Uy added, underscoring the prevalence of smuggled tobacco in remote regions.
Gatchalian called on the Philippine National Police and the National Bureau of Investigation to intensify their efforts against smugglers and the masterminds behind the illicit trade of excisable products.
“There should be a whole-of-government approach,” he said. He called on the Departments of Finance, Trade and Health to collaborate on a comprehensive strategy to tackle the issue.
“In my opinion, enforcement is not enough. We have to look at the other causes of illicit trade in our country. We cannot ignore the theory of incentives given the significant price difference between illicit cigarettes and legitimate ones,” Gatchalian said, emphasizing the need for a multifaceted approach.