Illicit Tobacco Trade in the Philippines: Findings from Sari-Sari Store Surveys and Empty Pack Audits

This Report was written by Action for Economic Reforms (AER) and Economics for Health (EfH). The report examines the prevalence and characteristics of illicit tobacco trade across the Philippines. The researchers conducted a randomized audit of sari-sari stores and an empty cigarette pack collection, along with other methods to triangulate the data. Specifically, the study focused on 8 areas: Navotas City, Pasay City, and Quezon City in Metro Manila; Batangas City and Dagupan City in Luzon; Mega Cebu in the Visayas; and General Santos City and Zamboanga City in Mindanao). Three forms of tax evasion were established: pricing below the sum of excise and value added taxes, tax stamp violations, and smuggling of unregistered brands. The findings showed significantly higher prevalence of illicit trade according to each of these measures in General Santos and Zamboanga, with low rates in other surveyed cities. This variation between cities suggests that tobacco taxes are not driving illicit trade, but rather other factors are involved. General Santos and Zamboanga are port cities, with traditionally open borders and free trade, which conflict with current laws. The report concludes with recommendations for policy makers to strengthen enforcement and improve border controls to reduce illicit trade, while continuing to raise tobacco taxes to reduce consumption.