By Isa Jane D. Acabal, Researcher
THE PHILIPPINES lost about P141 billion in government revenue to illicit tobacco trade in 2024 and 2025, with illegal vape products emerging as a significant source of tax leakages, in response to a report by the EU-ASEAN Business Council (EU-ABC) and Euromonitor International Ltd.
The Philippines posted the third-highest revenue loss amongst six Southeast Asian countries covered by the study, after Indonesia and Malaysia, in response to the report released on Monday.
Philippine government revenue losses reached about $2.46 billion through the two-year period, composed of about $2.06 billion from illicit cigarettes and $400 million from illegal e-vapor products.
“The continued rise in illicit tobacco trade in ASEAN (Association of Southeast Asian Nations) and the broader Asia-Pacific region signals displacement of the legitimate market, while amplifying challenges for regulation, enforcement and diminishing fiscal contribution,” the council said within the 43-page report.
The study covered the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam, collectively known as ASEAN-6. It assessed the dimensions of illicit trade involving cigarettes and e-vapors, including contraband, counterfeit, illicit whites, untaxed products and unbranded tobacco.
Among the many countries surveyed, the Philippines posted the very best revenue loss tied to illicit e-vapes. It also had the very best incidence of illegal vape products amongst markets where e-vapors are legal.
The report estimated that 85.6% of e-vapes sold within the Philippines last 12 months were illicit products.
Meanwhile, illicit cigarettes accounted for 25.3% of the local market, significantly higher than the ASEAN-6 average of 16.1%.
Across Southeast Asia, governments were estimated to have lost a combined $13.07 billion in revenues in 2024 and 2025 as a result of illicit tobacco trade.
The report expects the illicit tobacco market in ASEAN-6 to expand further, with illicit trade incidence expected to rise to 27.8% by 2028 from 23.6% in 2025.
Researchers warned that the expansion of illicit tobacco trade could weaken government revenues, hurt legitimate businesses and increase risks to consumers.
This affects government revenues and social welfare programs, drives down the profitability of legal businesses, supports illicit activities within the markets and poses health risks to consumers, EU-ABC said.
EU-ABC Executive Director Chris Humphrey said illicit tobacco trade diverts money away from the formal economy and reduces the region’s attractiveness to investors.
“Here within the Philippines, the National Calamity Fund could easily be funded if we could stop the illicit trade in tobacco and [collect the proper taxes] from it,” he individually told a news briefing
He added that the issue extends beyond the tobacco industry because widespread illicit trade creates unfair competition and discourages investment across sectors.
“It diminishes the region’s attractiveness for investments not only in tobacco, [but]… in other sectors as well,” he said.
‘GOOD ENFORCEMENT’
Firdaus Muhamad, head of consulting for the Asia-Pacific region at Euromonitor, said rising tobacco taxes, affordability pressures and widening price gaps between legal and illicit products proceed to fuel demand for illegal products.
“The common trap on this story that we’re telling is affordability pressures,” he told the briefing. “Annual tax increases and the legal-illicit price gap create room for some illicit products to compete.”
He added that illicit operators could still raise prices while remaining cheaper than legal products, allowing illegal sellers to preserve and even expand profit margins.
The EU-ABC estimated illicit tobacco operators within the Philippines earned about $2.2 billion from illegal trade in 2024 and 2025.
To deal with the issue, Mr. Humphrey called for stronger regional coordination, especially amongst ASEAN countries with porous land borders.
He said governments should strengthen cooperation on Customs enforcement and improve digital track-and-trace systems to higher monitor tobacco products across borders.
Filomeno S. Sta. Ana III, coordinator of Motion for Economic Reforms, said stronger enforcement stays probably the most effective approach to combat illicit trade.
“The important thing measure is nice enforcement,” he said by telephone, noting that the Bureau of Internal Revenue, Bureau of Customs and native governments should proceed intensifying anti-smuggling operations.
The report also noted that outright bans on e-cigarettes and vape products haven’t eliminated illicit trade in countries where such restrictions are imposed.
Mr. Sta. Ana noted that while bans could reduce legal sales, they might also expand underground markets if enforcement stays weak.