Senator Sherwin Gatchalian has expressed concern over the widespread smuggling and illicit trade of excisable products, including cigarettes and vapes, warning this could lead to peace and order issues.
Aside from this, Gatchalian also said such activities erode the country’s revenue collection and pose public health concerns.
“My worry is a reversal in smoking prevalence trends. We previously had a win-win situation where smoking prevalence was decreasing while tax collection was increasing,” Gatchalian said.
“However, the trend has now reversed. We are now in a lose-lose situation with smoking prevalence rising and tax collection declining,” he said.
A study presented by the Bureau of Internal Revenue (BIR) showed that excise tax collection has steadily declined, reaching only P130.9 billion from January to November last year.
This, compared to P134.9 billion collection in 2023, P160.3 billion in 2022, and P176.5 billion in 2021.
The Senate Committee on Ways and Means chief also noted that while the overall cigarette market declined from 103.3 billion sticks in 2014 to 55.6 billion sticks in 2023, the market share of illicit trade rose from 12.2% in 2014 to 19.8% in 2023.
Studies also show that smokers now prefer smuggled cigarette products due to their significantly lower prices.
“We don’t want the value of illicit trade to surpass that of legitimate entities,” he said.
“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,” he added.
The lawmaker said the government should curb the trend by recognizing the harm it causes not just in revenue loss but also consider the health risks as these activities operate under the radar.
“There should be a whole-of-government approach,” he said, urging the departments of finance, trade, and health to develop a strategy to address the problem.
At the same time, Gatchalian also urged the Philippine National Police (PNP) and the National Bureau of Investigation (NBI) to go after the smugglers or those behind the illicit trade of excisable products.
He noted there were reports that cigarette smuggling funds terrorist and rebel groups in Mindanao.
“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,” he said.