By Mayvelin U Caraballo
Consumption of illicit or untaxed cigarettes in the country almost tripled last year, making the Philippines one of the top illicit cigarette markets in the Association of Southeast Asian Nations (Asean), a study said.
Consumption of illicit cigarettes in the country surged 198% in 2013 from a year earlier, findings of the newly released “Asia-14 Illicit Tobacco Indicator 2013” study showed.
“Domestic illicit cigarettes are produced locally and sold without payment of the required taxes, while non-domestic cigarettes are smuggled contraband or counterfeit originating in another country,” the study explained.
According to the study, the Philippines now accounts for 34.5% of all illicit cigarette consumption in the region, second only to Vietnam with 39%.
However, it noted that in contrast to other Asean countries, the Philippine problem can be traced back to domestic illicit cigarettes.
The study added that domestic illicit consumption in the Philippines is estimated to have accounted for 16.3% of the total 105.5bn legal and illicit combined cigarettes consumed last year. The study noted that the Philippines accounts for 97% of all illicit domestic consumption in the Asean.
The 17.1bn domestic illicit cigarettes consumed in 2013 reflects a sharp increase from the 6.1bn domestic illicit cigarettes consumed in 2012, and propelled the country toward the top of the illicit trade rankings in the region, it said.
“The figures mean that nearly one in five cigarettes smoked in the Philippines last year was illicit,” the study said.
The Asia-14 report estimated revenues lost to the illicit cigarette trade at $300mn in Philippine excise taxes and $68mn in value-added tax (VAT).
The total of $368mn was a 497% increase from the $62mn tax loss estimated for 2012, and represents 15.3% of the country’s potential total excise tax revenue, the study added.
The study, which is intended to provide policy makers and administrators with an objective and independent annual benchmark on illicit tobacco trade and its impact on government revenues, was conducted by Oxford Economics in partnership with the International Tax and Investment Centre (ITIC), covering all Asean countries as well as Australia, Hong Kong, Pakistan and Taiwan.
