A report highlights the possible involvement of the tobacco industry in the illicit trade in the Philippines

The tobacco industry's systematic argument against tax increases is the growth of the illicit trade. A recent report by STOP, an international tobacco industry watchdog, examined the industry's role in the illicit cigarette trade in the Philippines and the associated tax revenue losses.[1]. Independent data contradicts the tobacco industry's arguments regarding tobacco product taxation. While such data is essential for any strategy to reduce tobacco consumption and finance healthcare systems, combating the illicit tobacco trade requires supply control, strengthened independent controls and sanctions, and the fight against corruption.

The tax increase, attacked by the tobacco lobby, is essential for public health.

As the 20th Philippine Congress resumed its work, public health actors expressed their concerns about the persistence of misinformation narratives attributing illicit trade to tobacco tax policies.

According to these experts, a reduction in taxes could reverse significant progress in public health by keeping prices low, encouraging smoking among young people, and exacerbating health inequalities.

" The increase in tobacco taxes has helped reduce smoking in the Philippines. It is therefore not surprising that the industry is seeking to reverse these measures. »" said Jorge Alday, director of STOP at Vital Strategies.

Indeed, public health measures have helped to reduce the prevalence of smoking among Filipinos aged 15 and over, from 30 % in 2009 to 20.4 % today.

In 2024, tobacco taxes generated 134.52 billion Philippine pesos (approximately €1.95 billion), a significant portion of which was allocated to funding the healthcare system. Nevertheless, this remains less than half the financial cost of tobacco, estimated at 261 billion pesos (approximately €3.8 billion) annually. That same year, the country's two main tobacco manufacturers, PMFTC and Japan Tobacco International, alone generated $7.3 billion (approximately €6.2 billion) in revenue.

Furthermore, the Philippine Bureau of Internal Revenue (BIR), an agency of the Department of Finance, estimated that the government lost 25.5 billion Philippine pesos (US$448.6 million) in tax revenue in 2023 due to the illicit tobacco trade.[2].

Independent data reveals the key drivers of illicit trade, including the industry itself

Manufacturers attribute the growth of this illicit trade to tax increases and are lobbying for their reduction. The findings of the scientific literature on the subject, as summarized in the report, indicate that, even with uniform taxation nationwide, levels of illicit trade vary significantly across regions, suggesting that other factors, such as a lack of controls, insufficient monitoring and traceability of products facilitating the diversion of goods from the legal supply chain, and varying degrees of local corruption, play a decisive role.

The report highlights that corporate strategies are a key driver of illicit trade. In the Philippines, certain forms of illicit trade and pricing strategies can indirectly benefit tobacco companies by maintaining product accessibility, undermining existing public health policies, and manipulating political opinion against stricter regulations.

An audit of empty cigarette packs conducted by Action for Economic Reforms (AER) in neighborhood grocery stores revealed that over 90% of the collected packs bore trademarks registered with the Bureau of Income Tax (BIR). This proves that Filipino smokers predominantly purchase registered brands produced by major tobacco companies, and that the products come directly from the manufacturers' machines and are therefore not counterfeit.

The audit also identified missing or counterfeit tax stamps on packs of brands associated with Philip Morris Fortune Tobacco Corp. (PMFTC), a subsidiary of Philip Morris International (PMI), and Japan Tobacco International (JTI), raising questions about the control of distribution channels. This allows these manufacturers to underreport their official sales.

Illicit products are priced lower, often at the recommended tax rate for legal products. They are generally sold in small neighborhood shops and generate significant profits for tobacco manufacturers suspected of tax evasion. They may also lack appropriate graphic health warnings and circumvent age restrictions, at least partially undermining the effectiveness of tobacco control measures aimed at reducing smoking.

Such prices make cigarettes more affordable, especially for young people and others in precarious situations, while depriving the state of essential revenue.

The report's authors also highlight the gap between manufacturers' rhetoric and their practices. While denouncing tax increases as fueling the growth of illicit trade, they themselves raise their prices to maintain or even increase their profit margins.

However, by portraying themselves as victims of the illicit trade, companies try to present themselves as proactive in offering solutions. They are thus increasing their offers of official collaboration with governments to combat this problem. This gives them better access to policymakers and increases the risk of the industry influencing public health policies, such as tobacco taxes.

The authors therefore recommend taking into account the responsibility of the industry in parallel markets and applying effective measures in this regard.

The authors point out that in order to effectively combat parallel markets, it is necessary to control the supply chain, particularly at ports and borders, in coordination with the relevant national authorities and within the country, all the way to the retail distribution of products.

The ratification by the Philippines of WHO Protocol to Eliminate Illicit Trade in Tobacco Products and transposing its provisions into its national law could facilitate the application of these measures.

Public decision-makers are also urged not to give in to industry pressure to challenge tobacco taxes. Furthermore, the methods for setting minimum tax rates should be reviewed to make them more transparent and easier to implement.

Finally, the authors recommend avoiding any collaboration with the tobacco industry, which they consider to be an actor whose commercial interests are fundamentally opposed to and irreconcilable with health policies. In accordance with Article 5.3 of the WHO Framework Convention on Tobacco Control (FCTC), Philippine authorities are required to limit their interactions with this sector to what is strictly necessary, including on issues related to illicit trade.

The CNCT points out that these industry practices to facilitate illicit trade also take place in Europe as well as in many regions around the world.

©Generation Without Tobacco

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[1]Complicit in Illicit? Tobacco Industry Tactics in the Philippines, STOP, published on February 4, 2026, accessed on February 6, 2026

[2]New Report Flags Possible Tobacco Industry Role in Illicit Cigarette Trade in the Philippines, STOP, published on February 4, 2026, accessed on February 6, 2026

National Committee Against Smoking |