The Philippine Tobacco Institute (PTI) seeks to adjust the cigarette excise tax amid the influx of illicit cigarette trade.

“There is an urgent need to calibrate the tax rate to an optimal level and enhance enforcement and prosecution efforts so we can fully realize the benefits of the Sin Tax Law for both public health and government revenues,” PTI president Jericho Nograles said in a statement released by the institute on Tuesday.

“With annual tax hikes making legal products less affordable, consumers are not quitting — they’re switching,” he added.

Republic Act 11346 imposes a 5 percent increase on excise taxes on tobacco products each year. Half of the total excise taxes on these goods is directed to the Universal Healthcare Program.

However, PTI said more tax evaders have been selling much cheaper cigarettes at P40 per pack while the legal ones are priced at P140 per pack.

A legal pack of cigarettes must be sold for at least P66.15, including the excise tax but excluding merchants’ other costs.

240% smuggled sticks growth

Given the broad price gap, Nograles said the share of illegal cigarettes in the market expanded by 240 percent from 2020 to 2024.

Thus, he said government revenues from excise taxes on tobacco dropped to P134 billion last year from P176 billion in 2021.

If police efforts and tax reforms are delayed, Nograles said the government could lose more than P52 billion in annual revenues.

To prevent government revenues from dwindling, he proposes a unified tax rate on vapor products and stronger monitoring of e-marketplaces.

Nograles also seeks more efficient investigations and countermeasures on illegal traders by several government agencies, including the Bureau of Internal Revenue, the Bureau of Customs, the Anti-Agricultural Economic Sabotage Council and the Anti-Money Laundering Council.