We cannot trust the tobacco industry in the fight against illicit trade
On Nov. 25, the Philippine Star published an opinion piece by Marichu Villanueva entitled “Defying the odds.”
The piece attacked illicit tobacco trade, a phenomenon that health advocates have likewise flagged as a threat to public health and government revenue. However, in the process of condemning those who participate in illicit trade (specifically unregistered cigarette brands), the article also whitewashes what the author calls “legitimate tobacco manufacturers” or registered tobacco brands.
“There is a world of difference between those who comply with the law and contribute to national development, as against those who operate in the shadows, undermining both revenue collection and public health and welfare,” the piece read.
Let’s get one thing straight: illicit tobacco is dangerous. When tobacco is cheap, it entices the price-sensitive youth. It defeats the purpose of raising tobacco prices through taxation to deter consumption. But all kinds of tobacco, whether licit or illicit, kill. Paying the legally mandated excise taxes does not give registered tobacco companies a pass or excuse them from “feeding nicotine addiction and endangering the public health system,” which is what the author only accuses unregistered brands of.
We cannot fall for the false narrative that the tobacco industry peddles: that they are reliable allies in the fight against illicit trade. Even registered tobacco brands have been proven to be complicit in illicit trade, the most prominent example being the case of tax evasion by the tobacco giant Mighty in 2017, when the company was exposed for using counterfeit tax stamps and was made to pay a total of P30 billion, the largest sum raised by the Philippine government from a tax settlement to date. The tobacco industry thus cannot feign innocence.
Legality aside, we must emphasize that from a public health perspective, even registered or “legitimate” cigarettes are harmful to health.
The legal tobacco industry opposes illicit trade because the latter eats up the market share of the former. But tobacco control advocates fight illicit tobacco trade because it is harmful to health and public revenues.
Globally, the tobacco industry has exaggerated the magnitude of illicit trade as a justification to lower tobacco taxes. The tobacco industry falsely claims that illicit trade and high tobacco tax rates are linked.
Earlier this year, there was a brazen attempt by Northern Luzon legislators, mostly from tobacco-growing regions, led by Deputy Speaker Rep. Kristine Singson-Meehan, to lower tobacco taxes through filing House Bill (HB) 11360. Although HB 11360 did not have a Senate counterpart and was not signed into law, a few months into the 20th Congress, Reps. Singson-Meehan and her colleagues from Northern Luzon, Rep. Ferdinand Hernandez, and Rep. Rufus Rodriguez, filed House Bills 5207, 5212, and 5364, proposing to lower taxes on vape products.
The sponsors of what civil society watchdogs call the “Sin Tax Sabotage Bill” argue that tax rates are too high, thereby causing illicit trade.
But recent evidence from an Action for Economic Reforms (AER) and Economics for Health (EfH) study done in 2024 shows that in the major cities covered by the survey done throughout the country, illicit trade prevalence is most disturbing only in Mindanao while it is muted in other parts of the country. This implies that national tax policy is not the main driver of illicit trade. The study found that the prevalence of unregistered brands sold in sari-sari (sundry) stores was as high as 58.6% in Mindanao (General Santos City), while it was as low as 0% in Metro Manila (Pasay) and Northern Luzon (Dagupan).
Furthermore, the AER and EfH study showed that registered tobacco brands should be investigated, given that even packs bearing the labels of registered brands were found by the Bureau of Internal Revenue (BIR) to have fake tax stamps.
It showed that 8.4% of audited JTI-branded cigarette packs in Quezon City, for example, were found to have fake tax stamps. Meanwhile, in Quezon City, 8% of audited Philip Morris-branded cigarette packs were found to bear fake tax stamps.
The study recommends that the solutions to illicit trade, including a comprehensive track-and-trace system with physical and digital markers, are independent of the tobacco industry, and that any proposal to lower excise taxes on tobacco products be vehemently rejected.
We must combat the tobacco industry’s misinformation and resist the narrative painting registered brands as merely innocent victims in illicit trade, or even as beacons of public health and good governance simply for paying the taxes required of them. We must not forget the economic and social toll of all kinds of tobacco, whether licit or illicit.
Pia Rodrigo is AER’s strategic communication officer.
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