Lifting COVID-19 Restrictions May Restart Illegal Tobacco Trade in the Philippines

The Department of Finance (DOF) would like the incoming Marcos administration to increase taxes on tobacco products in 2024 to collect a minimum of ₱349.3 billion as part of a fiscal consolidation plan. 

Tax reform on tobacco items such as e-cigarettes and cigarettes can amount to ₱91.4 billion which the government can use for foreign debt payments of the Philippines. 

The EU-ASEAN Business Council conducted research last 2019 and found out that tobacco smuggling takes more than ₱11 billion or about $213.4 million and the Philippines ends up bearing these losses. The paper also details how the government misses out on taxing about eight billion sticks that illegally circulate each year. 

The study identified the reluctance to sign the Protocol to Eliminate Illicit Trade in Tobacco Products. This treaty would need its signing parties to collaborate and share any information on tobacco smuggling operations. 

“Correcting the regulatory and economic circumstances that enable illicit trade also can improve sovereign credit ratings, thereby, reducing the cost of borrowings and enabling governments to raise capital in the international financial market, stimulating long-term investments and growth,” the study likewise mentioned. 

According to the study, governments can increase their economy’s credit ratings in the long term with the taxes they will be able to collect from the illegal circulation. 

PBA party-list representative Cong. Jericho Nograles has said to reporters that “as to the proposal of raising taxes on cigarettes, you will give smugglers additional incentive to intensify their illicit trade. The government has to look at the revenue losses owing to the lack of proper policing and [weakness in] border defenses,”

Congressman Nograles was the previous head of the technical working work on agricultural smuggling and illicit tobacco of the House. He also recommends that the Anti-Agricultural Smuggling Act of 2016 or the Republic Act 10845 be amended to add cigarettes to the list of products that would constitute economic sabotage when smuggled.

Source: Philstar