Senator Sherwin Gatchalian said the government should address illicit trade in order to generate higher revenue collection and provide some relief for its limited fiscal space. 

Gatchalian made the appeal during the recent Development Budget Coordination Committee (DBCC) briefing in the Senate on the proposed P5.768-trillion national budget for 2024.

The senator cited the case of the tobacco industry as an example, saying cigarettes soled from illicit trade have been steadily increasing from 10.8 percent in 2018 to 16.7 percent in 2022, referring to Euromonitor data provided by Philip Morris.

This figure, he said, is expected to further rise this year to 18.5 percent or equivalent to P30-billion.

“The government needs to come up with a novel plan to address illicit trade,” said Gatchalian, chairman of the Senate Committee on Ways and Means.

Gatchalian reminded the government the imposition of new taxes is only to the disadvantage of taxpayers who fulfill their obligation to the government.

Thus, it is imperative for the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) to enhance tax administration efforts to address the revenue deficit.

“When we increase taxes, we are penalizing those who are paying taxes. We have to address illicit trade or it will be very hard to justify new taxes because some people are making P30-billion a year from illicit trade,” Gatchalian told state economic managers

“If you raise taxes, it becomes very attractive for illicit traders to go into this type of business because the reward is very high. How are we addressing illicit trade? What type of enforcement are we doing to curb illicit trade in the different products that we have imposed taxes on?” he pointed out. 

Gatchalian said revenue collecting agencies should consider asking the support of various local government units (LGUs) in the campaign against illicit trade.

“Why don’t we ask for the help of LGUs? They know each and every bodega in their localities. We can put in place a reward system if they find a bodega being used for illicit trade,” he pointed out.