Phl loses P151 billion revenue to illicit tobacco trade – report

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May 19, 2026 | 12:00am

MANILA, Philippines — The Philippine government may have lost $2.5 billion (around P151 billion) in revenues over the past two years due to rampant illicit cigarette and e-vape trade, funds that could have been used to address the Middle East crisis, a new report said.

The fuel crisis and significant levy increases are likely to worsen illicit trade.

A study from the EU-ASEAN Business Council (EU-ABC) and Euromonitor International showed that the Philippines’ forgone revenue due to the illicit tobacco trade reached $2.46 billion for the 2024 to 2025 period.

Over the two-year period, the country is estimated to have missed collecting $2.06 billion in taxes on cigarettes and $400 million from e-vapes.

In the Association of Southeast Asian Nations-6 (ASEAN-6) region, the Philippines had the second-highest revenue loss, trailing behind Malaysia ($2.51 billion).

Overall, the ASEAN-6 revenue loss is estimated at $13.07 billion in 2024 and 2025.

“At a time of geopolitical uncertainty, when we are facing supply chain disruptions borne out of the crisis in the Middle East and that is particularly being felt here in the Philippines, the money that is being lost to governments could be easily used to help mitigate some of those effects,” EU-ABC executive director Chris Humphrey said.

He said this could have been used either through fuel subsidies or through investment in schools, hospitals and infrastructure.

In addition, the official said the Middle East war is going to exacerbate illicit trade problems, as consumers hit by high inflation will choose more affordable and illicit options.

Meanwhile, the study warned that ongoing scheduled increases in excise taxes across markets are expected to widen price gaps between illicit and legitimate cigarettes further, where consumers would prefer illicit and cheaper kinds.

In the Philippines, the government imposes an annual five percent increase in tobacco excise taxes.

Humphrey said the government should avoid implementing unannounced, large increases in tobacco taxes, as they could shock the market and further push them into the illicit market.

“What we need is to make sure that the taxation regimes are evenly applied. We all know governments are going to look to increase taxes, they’re looking to raise more revenue but those tax increases need to be predictable and multi-year,” he said.

Citing Malaysia as an example, he explained that a sharp, single?year hike in tobacco duties triggered a surge in illicit purchases and trade, with nearly 60 percent of the market now dominated by illegal products in that country.

Euromonitor International head of consulting Firdaus Muhamad said the multi-year approach allows the industry to adjust, particularly the legitimate sellers.

Meanwhile, asked about the proposal for a total ban on vapes in the country, as urged by the Health Secretary Ted Herbosa, Humphrey said this would only push people underground.

As illicit tobacco products eat into the government’s potential revenue, the report said illicit operators in the country have gained $2.21 billion (around P128 billion) from both illegal cigarettes and e-vapes in the two-year period.

The Bureau of Internal Revenue aims to collect P359.6 billion in excise tax this year.