Latest market surveys say that one can buy illicit cigarettes for P3 to P4 per stick. In contrast, the lowest priced legal brand goes for P7 per stick.
The choice is obvious. The three-to-four-peso difference seals the deal for many Filipinos. It also makes cigarettes cheaper for minors who are experimenting with and exploring tobacco at their tender age and the poor.
One of every five cigarettes sold in the country today comes from illegal sources, untaxed and unregulated. In just four years, illicit cigarette trade in the Philippines has more than tripled, from 7.4 percent of total volumes in 2021 to 20.9 percent in 2025. This reflects a staggering 182 percent increase in just four years, equivalent to an average annual growth of almost 30 percent.
As a result, smoking prevalence has risen for the first time in 15 years, from 18.5 percent of adults in 2021 to 23.2 percent in 2025, reversing years of progress under the Sin Tax Law.
More alarmingly is the doubling of youth smokers (10 to 19 years old) from 2.3 percent to 4.8 percent over the same period.
Of this number, Mindanao continues to be the hotbed of illicit cigarette products with over 50 percent incidence followed by Luzon (7.4 percent) and Visayas (4.8 percent) as of end-2024.
These developments pose threats to our economy, to public health, to national security and to the livelihood of many Filipinos.
Illegal cigarette trade has caused the government to lose revenue. Collections dropped from P176 billion in 2021 to an estimated P113 billion in 2025. The Bureau of Internal Revenue estimates annual losses of at least P50 billion due to smuggling and illegal manufacturing.
The government slaps an excise tax on tobacco products. This is implemented progressively, and the tax for this year is P66.15 per pack. This is intended to curb smoking, on the one hand, and sustain government revenues on the other.
Legitimate manufacturers and importers of cigarettes suffer from lower volumes, translating into lower excise and value-added taxes for the government. This means less funding for Universal Health Care (PhilHealth) and the Department of Health (DOH)’s Health Facilities Enhancement Program. Lost revenue from tobacco excise taxes deprives millions of Filipinos of essential health services.
Equally worse is the fact that these cheap illicit cigarettes contain harmful chemicals such as cadmium, lead and contaminants like insect parts and human waste. Furthermore, the rise of counterfeit products like ‘tuklaw’ cigarettes, which contain synthetic cannabinoids, has led to severe health issues, including seizure-like symptoms.
And then, there is the effect of illicit cigarettes on the lives and livelihoods of tobacco farmers in the Philippines. There are currently 2.2 million Filipinos dependent on the tobacco industry, according to the National Tobacco Administration, whose families depend on their earnings from locally grown tobacco to sustain their families and help send their children to school.
Legal cigarette production has dropped from 62.6 billion sticks in 2021 to 39.1 billion in 2025, leading to lower tax contributions and reduced economic activity.
Illicit cigarettes also fuel organized crime and are linked to corruption, drug and arms smuggling, human trafficking and terrorism.
The rise of illicit trade undermines the objectives of Republic Act 11346 or the Sin Tax Law and undermines the DOH’s goal of achieving a 30 percent relative reduction in tobacco use in the Philippines.
To be sure, the trend has not just been observed in the Philippines. Other countries have also had their share of problems fueled by illicit cigarette trade.
For instance, sharp duty hikes have incentivized smuggling in Hong Kong, thus halving revenues from legitimate tobacco trade. Seizures of illicit cigarettes have tripled.
Malaysia, for its part, experienced a significant rise in illicit cigarette trade following an increase in excise taxes. While Malaysia did not double the excise tax, it raised the rate from RM280 per 1,000 sticks to RM400 per 1,000 sticks in 2015. The steep and substantial 43 percent increase in excise taxes in 2015 led to a 42 percent rise in the consumption of illicit cigarettes, with no significant decline in overall cigarette consumption (16.7 billion sticks in 2015 vs. 15.1 billion in 2024).
As a result, the illicit cigarette market now accounts for half of all cigarette sales in Malaysia, costing its government a staggering RM5 billion annually or P68 billion.
Australia has a more daunting situation, with illicit tobacco trade going beyond mere revenue loss. Rather, the trade has been directly linked to organized crime and terrorism. Syndicates are now using arson as a weapon. Worse, these have also been connected to foreign state-backed destabilization efforts.
What is happening in the Philippines and in other countries transcends fiscal or regulatory issues. Urgent and decisive action is needed.
What, then, can be done about the proliferation of illicit tobacco products in the Philippines?
We need greater collaboration between the public and private sectors. Any excise hike beyond five percent per annum carries the risk of fanning illicit trade. There should also be laws that would close legal loopholes and deter the activities of smugglers and illegal manufacturers. Increased inter-agency cooperation for tracking, tracing and enforcement should be institutionalized.
Alongside efforts to ensure that the people’s taxes are spent prudently as planned, instead of lining the pockets of corrupt officials, we must also pay attention to arresting the detrimental effects of illicit cigarette trade on our public coffers. Much can be done with the revenues being lost. We hope the government listens and cracks down on illegal manufacturers and traders who are sapping the life out of our industries and our people.