A senator on Friday sounded an alarm over the widespread smuggling and illicit trade of excisable products, including cigarettes and vapes, which is not only affecting the Philippine economy but also financing terrorist groups in the countryside.

Senator Win Gatchalian said the rampant smuggling of these excisable products would tear down the country’s revenue collection, pose health concerns to people, and create peace and order issues.

“My worry is a reversal in smoking prevalence trends. We previously had a win-win situation where smoking prevalence was decreasing while tax collection was increasing. However, the trend has now reversed. We are now in a lose-lose situation with smoking prevalence rising and tax collection declining,” Gatchalian told reporters.

Data from the Bureau of Internal Revenue showed that excise tax collection has steadily declined, reaching only P130.9 billion from January to November last year. The figure represents lower revenue than P134.9 billion in 2023, P160.3 billion in 2022, and P176.5 billion in 2021.

Gatchalian also noted that while the overall cigarette market declined from 103.3 billion sticks in 2014 to 55.6 billion sticks in 2023, the illicit trade market share rose from 12.2 percent in 2014 to 19.8 percent in 2023.

“We don’t want the value of illicit trade to surpass that of legitimate entities,” he said.

He then pointed out that smokers now prefer smuggled cigarette products due to lower prices.

“In my opinion, enforcement is not enough. We have to look at the other causes of illicit trade in our country. We cannot ignore the theory of incentives given the significant price difference between illicit cigarettes and legitimate ones,” Gatchalian lamented.

“We must recognize the harm this causes — not just in lost revenue but also in health risks, as these activities operate under the radar,” he added.

Hence, Gatchalian called for a whole-of-government approach to addressing the problem.

He urged the finance, trade, and health departments to develop a strategy for managing the issue.

Gatchalian likewise called on law enforcement agencies, including the Philippine National Police and the Bureau of Investigation, to investigate those behind the smuggling and illicit trade of excisable products.

He noted reports that cigarette smuggling had been funding terrorist and rebel groups in Mindanao.

“Another consequence is that profits from illicit trade are reportedly being funneled into terrorism, making this issue not only an economic concern but also a threat to peace and order,” Gatchalian said.