The Philippine Tobacco Institute (PTI) has urged the government to lower tobacco tax rates to address declining revenues exacerbated by rising illicit trade and price disparities.

The organization argues that existing tax policies are closely linked to illegal trading activities, prompting calls for a recalibration of tobacco excise taxes alongside enhanced enforcement measures.

This appeal comes ahead of discussions in the Senate Committee on Ways and Means regarding House Bill 11360, which proposes an odd-even scheme for adjusting tobacco excise taxes.

Under this legislation, the tax would increase by two percent every even-numbered year and four percent in odd-numbered years until 2035, aiming to reduce the current five percent annual increase rate based on a P60 per pack tax.

Jericho Nograles, PTI president, emphasized that aggressive tax hikes contribute to a widening price gap between legal and illegal tobacco products, thereby incentivizing smuggling and counterfeiting.

He noted that the automatic increases in tax have led to diminishing government revenues, suggesting that legislative adjustments to lower tax rates combined with stronger enforcement could enhance collections.

Nograles stated, "It would not only be acceptable, but a win-win for industry and government when illicit trade in tobacco is stopped."

Data illustrates that illicit tobacco consumption reached a disturbing level of 18.2% last year, indicating that one in every five cigarettes sold in the Philippines is sourced illicitly.

The repercussions for national revenues are significant, with excise tax collections decreasing to P134 billion in the previous year and a drop in the sale of legal, tax-paid cigarettes to 43.8 billion sticks in 2024.

Despite the contraction in legal smoking products, the overall prevalence of smoking has reportedly increased to 23.2%, fueled by the availability of cheaper and unregulated alternatives.

These illicit products can often be found for as little as P40 per pack, in stark contrast to the legitimate market price of around P140.

This growing trend poses a threat to public health funding, as diminishing tax revenues jeopardize government financial support for health programs.

In addressing the issue, Nograles highlighted concerns regarding the accessibility of illicit tobacco products, noting that they are now openly sold to minors and widely available online, often with little oversight.

He cautioned that failing to take decisive action could lead to lasting damage to fiscal health, public welfare, and the rule of law.