Senator Sherwin Gatchalian has denounced the rampant illicit tobacco trade in the Philippines and demanded immediate action from law enforcement agencies.
Gatchalian, speaking during a Senate hearing on tobacco excise taxes, called for intensified enforcement, aggressive prosecution and the creation of a full-time task force to tackle the crisis.
“This illicit trade is crippling our revenue and jeopardizing public health,” Gatchalian, who chairs the Senate ways and means committee, said during a hearing on tobacco excise taxes.
He highlighted the urgency of the problem, stating that 70 to 80 percent of vape products in the Philippines are illegal.
“Illicit trade is creating lots of problems in our country in terms of revenue collection and health,” Gatchalian said.
“We demand more aggressive enforcement because the numbers are showing the uptick of vaping use among the youth is entering a very dangerous stage. And if the products are not even registered, then that’s more dangerous because we don’t know what’s inside,” he added, speaking in a mix of English and Tagalog.
Global illicit trade consultant Rohan Pike, a veteran of the Australian Federal Police, cautioned against overly punitive approaches to tobacco and vape regulation. Speaking at the same hearing, Pike urged Filipino lawmakers to learn from Australia’s experience and balance enforcement, taxation, and public health goals to avoid empowering criminal syndicates.
“Australia’s failed policy has seen illicit cigarette sales surge to over 40 percent, and illicit vape sales exceed 95 percent,” Pike said. “If you think 80 percent is bad here, we [Australia] can beat that.”
Pike is the founder of Australia’s Tobacco Strike Team, the first dedicated illicit tobacco unit in the country. He said that despite massive law enforcement investments, seizures have not disrupted criminal networks in Australia.
“I note that authorities here are using high seizure rates as being the primary indicator of a job well done. I say that it is not an effective measure. Seizure rates merely reflect the amount of product that is out there and do not disrupt these criminal enterprises,” he said.
Pike also warned of the violent consequences of a booming black market. “There have been homicides, kidnappings, extortion, and armed robberies — all driven by the high value of smuggled products,” he said.
Pike also said the annual excise tax increases mandated in both the Philippines and Australia are now producing diminishing returns in government revenue and fueling organized crime. “We have already pulled that lever too far and have unbalanced the market. You have a chance to prevent making the same mistake with vapes as you have with cigarettes,” he said.
Pike said that in the Philippines, one can buy a packet of cigarettes for as low as P40 on the black market, which suggests that this is attracting new consumers to the smoking habit. “At P140 for a legal packet, this is 3 and ½ times the illicit price and an obvious driver of the black market,” he said.
Pike said that apart from the changes to taxation and enforcement, the Philippines should also consider tobacco harm reduction strategies. “The science is clear that combustible tobacco is the most dangerous form of nicotine consumption. There are, however, numerous healthier alternatives to cigarettes like vapes and pouches for those who cannot or do not want to quit their nicotine habits,” he said.
“If the Philippines were to incentivize those safer products through proportionate tax measures combined with an education campaign, you may find a sizeable proportion of your smoking community moves to safer products which would greatly benefit the health of the community,” he said.
Gatchalian said while enforcement operations are ramping up, prosecution remains lacking. Government data show that of the Bureau of Customs’ (BOC) 1,296 enforcement actions against illicit traders, only two have led to prosecution. The Bureau of Internal Revenue (BIR) said it conducted 1,785 enforcement operations, but only secured one prosecution.
“So in other words, there’s no certainty of prosecution. If there’s no certainty of prosecution, people will not be afraid of getting penalized or being imposed with penalties when they smuggle cigarettes in our country,” Gatchalian said.
Gatchalian demanded “credible, feasible, effective” action from regulatory bodies. “We want action already from the Bureau of Internal Revenue [BIR] and the Department of Trade and Industry [DTI]. This will kill our children,” he said, referring to the rise of illegal vape products that appeal to the youth.
The senator pushed for the establishment of a full-time inter-agency task force to address the problem of illicit trade, saying such a task force must be equipped with dedicated funding and resources.
He said enforcement agencies need proper funding and incentives to do their jobs effectively. He suggested allocating specific funds in the national budget to support operations and to incentivize agencies to strengthen enforcement.
Gatchalian said retailers of smuggled products are complicit in exposing Filipino youth to harmful and often unregulated products.
Congress approved in February House Bill 11360 seeking to curb the rampant illicit trade in tobacco and vape products by adjusting excise tax rates. The bill proposes a structured schedule of tax increases, with excise rates rising by 2 percent every even-numbered year starting Jan. 1, 2026, and by 4 percent every odd-numbered year beginning Jan. 1, 2027, until Dec. 31, 2035. It also proposed a unified tax rate for nicotine salt and freebase vapor products.
The Philippine market remains inundated with illicit vape products, evidenced by the Bureau of Customs (BOC) and the BIR’s seizure of over P5 billion worth of unregistered items in early 2025.
This was largely fueled by a tax system that incentivizes misdeclaration, with freebase nicotine taxed at a mere P6.62 per milliliter compared to the substantially higher P57.30 per milliliter for nicotine salt.
Industry stakeholders, including the Philippine E-Cigarette Industry Association (PECIA), voiced their support for a reasonable, unified tax rate but strongly opposed the proposed taxation of vape devices, arguing that consumables are already subject to levies.
Joey Dulay, president of PECIA, raised concern over the proposed tax rate of P66.15 per ml for vapor products. “This rate is excessive and unsustainable. It will place immense pressure on legitimate tax-paying businesses, many of which are already struggling to compete with the growing illicit market. And worse, it risks pricing vapor products at or above the cost of cigarettes, undermining their role in harm reduction. This is not just a business issue, it’s an economic one,” he said.
“We are not opposing taxation. We are advocating for a fair and sustainable rate of P30 per ml, a rate that supports compliance, protects jobs and ensures adult smokers have access to regulated, less harmful alternatives. We believe in working with government to craft policies that are fair, practical and aligned with public health goals,” Dulay said.
