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

Senator Win Gatchalian said the rampant smuggling of the excisable products would bring down revenue collection, pose health concerns, 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.

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

Gatchalian 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 the illicit trade to surpass that of legitimate entities,” he said.

He pointed out that smokers now preferred smuggled cigarette products due to their lower prices.

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

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

Gatchalian called for a whole-of-government approach to address the problem.

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

He called on law enforcement, the Philippine National Police and the National Bureau of Investigation, to investigate those behind the smuggling and illicit trade in excisable products.

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

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