Senate Flags Rise in Smoking, Fall in Tobacco Taxes Due to Smuggling

Senator Sherwin Gatchalian has raised concerns over the simultaneous increase in smoking prevalence and decline in tobacco excise tax collections, attributing these trends to the illicit tobacco trade. During a Senate ways and means committee inquiry on Thursday, Gatchalian described the situation as a “lose-lose” for the country.

“Smoking prevalence is going up, tax collection is going down. We have to analyze very carefully what happened,” Gatchalian said.

Decline in Excise Tax Collection

Data from the Bureau of Internal Revenue (BIR) revealed that excise tax collections peaked at ₱176.48 billion in 2021 but dropped to ₱160.4 billion in 2022, ₱134.91 billion in 2023, and a tentative ₱134 billion by December 2024.

Factors cited for the decline include:

1. A shift from traditional cigarettes to vape products.
2. The proliferation of illicit tobacco trade.

The Illicit Trade Problem

The Bureau of Customs (BOC) reported seizing billions worth of smuggled vape and tobacco products in recent years, including ₱9.194 billion in 2024, tripling the amount confiscated in 2023.

Gatchalian noted, “The illicit trade might be bigger than the legal activities if we don’t focus our attention on this.”

A BIR graph presented during the hearing estimated excise tax leakages from illicit trade could rise from ₱13.9 billion in 2019 to ₱65.9 billion by 2028.

Impact on Public Health

A study by the Food and Nutrition Research Institute (FNRI) showed that smoking prevalence among adults aged 20–59 increased from 19% in 2012 to 24.4% in 2023.

While the Department of Health (DOH) could not definitively link the rise in smoking to the illicit trade, Senator Gatchalian questioned why smoking rates are increasing when legal cigarette sales and excise tax collections are declining.

DOH Undersecretary Kenneth Ronquillo suggested the uptick might be due to vape use, but Gatchalian countered that vape products are intended to transition smokers away from traditional cigarettes, not increase the number of smokers.

Call for Action

Gatchalian urged stronger enforcement measures against the illegal tobacco trade and suggested exploring economic solutions to curb the problem.

“We need to look at other causes of illicit trade… Aside from enforcement, maybe we should consider economic strategies,” he said.

He emphasized the need to stabilize tax collections and reverse the trend of rising smoking rates, stating, “We are seeing a reversal of the gains that we’ve achieved in the last few years.”