Game plan vs illicit trade needed — solon
‘We should prepare ourselves to come up with a more innovative, dynamic counter moves against illicit trade.’
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‘We should prepare ourselves to come up with a more innovative, dynamic counter moves against illicit trade.’
Illicit cigarette trade is expected to contribute to higher smoking prevalence in the Philippines.
"We should prepare ourselves to come up with a more innovative, dynamic counter moves against illicit trade because that is the bigger evil right now," according to Rep. Joey Salceda, chairman of the House of Representatives' ways and means committee during a media forum.
"The revenue base will continue to shrink, and there is a chance that prevalence will start to increase especially now that (illicit cigarette) prices are low," he said.
Salceda said the low prices of smuggled or counterfeit cigarettes encourage smokers, representing 23 percent of the population, to buy more sticks of cigarettes. "For better or for worse, our advocacy of higher taxes played a key role in making the illicit sector more attractive but that is because of our rent-seeking bureaucracy," he said.
While excise tax collection fell, smoking prevalence in the Philippines remained high at 23 percent.
Removal of cigarettes from factories declined from 4.3 billion sticks in 2019 prior to the implementation of Republic Act 11346 to 3.2 billion in 2020.
Numbers from the World Bank also suggest that the decline in legal removals should not have been that high.
Smoking prevalence only declined from 23.4 percent in 2019 to 23 percent in 2020.
"A decline of one billion sticks could not have been accounted for by an incidence decline of just 0.4 percentage point alone. Something else happened. It is more logical to suspect that illicit trade accounted for much of the decline in illicit removals," he said.
He estimated that illicit cigarette sticks could have risen to around 2 billion in 2023.
Salceda said illicit trade also erodes government revenues.
"Until we resolve the issue of illicit trade of cigarettes to a significant degree, there will be a hesitation among the public to support further excise tax increases," he added.
Salceda said the enforcement and implementation of measures against illicit traders should be seriously considered before discussing tax increases. He said that if higher excise taxes would be imposed, illicit trade might be more widespread.
"Doing nothing against illicit trade is no longer an option. We need a marketing strategy. We need a price point where the key curve happens and therefore consumption collapses. We just have to make a certain consumer behavior study, basically at which point where differential becomes small and therefore enforcement becomes less important. So, there will be science-based approaches," he said.
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