THE Philippines has been identified as an “elevated risk” market as smuggling activity and demand for cheaper tobacco products continue to fuel the illicit cigarette trade.
A Euromonitor International study commissioned by the EU-Asean Business Council (EU-ABC) found that illicit cigarettes accounted for 25.3 percent of total cigarette sales in the country last year, up from 23.8 percent in 2024.
It was among the highest in the Asean-6 region and could rise to 28.9 percent by 2028.
Euromonitor said the Philippines, Thailand and Vietnam were elevated-risk markets due to a combination of price-sensitive consumers, established regional smuggling routes and enforcement challenges.
“The archipelagic composition of the Philippines is expected to render border enforcement challenging in the market, making it particularly susceptible to inflow of illicit cigarettes,” it added.
The study estimated that the Philippine government lost nearly $980 million in revenues from illicit cigarette sales in 2024, with the losses having risen to about $1.08 billion last year.
Across the Asean-6, the illicit tobacco trade resulted in about $13 billion in lost government revenue over the past two years.
About 86 percent of e-vapes sold in the Philippines are also illicit, the study found, the highest rate among Asean countries where e-vapes are legal.
Illegal e-vape sales caused an estimated P23 billion ($400 million) in government revenue losses from 2024 to 2025.
EU-ABC Executive Director Chris Humphrey told reporters on Monday that illicit cigarettes and e-vapes comprised a significant portion of the illicit tobacco trade in Southeast Asia.
While illicit cigarette growth is expected to decline over the next three years, Humphrey said that illicit e-vapes would see faster growth at 8.5 percent each year, up from 6.7 percent in previous years.
The report noted that the Philippines remained vulnerable to illicit trade partly because of scheduled excise tax increases on tobacco products.
“The common trend in this story that we’re telling is affordability pressures, annual tax increases, and the legal illicit price gap creates room for some illicit products to come to market,” said Firdaus Muhamad, APAC consulting head for Euromonitor International.
Under existing law, cigarette excise taxes increase by 5.0 percent annually, a factor that Muhamad said could further drive smokers toward cheaper illicit alternatives.
Illicit cigarettes entering the Philippines were said to be largely imported from neighboring Asean countries and China. While counterfeit cigarette production still exists locally, imported illicit products are increasingly dominating the market.
“The scale of illicit trade across Asean is often sorely underestimated and, more worryingly, growing at an alarming pace,” Humphrey said.
“If left unchecked, illicit trade could jeopardize Asean’s economic future as a global growth engine,” he added.
The report also showed the growing role of digital platforms in the illicit tobacco trade. Illegal cigarettes are increasingly sold through encrypted messaging apps such as Telegram and WhatsApp, as well as online marketplaces and social media platforms including Facebook Marketplace.
Offline distribution, meanwhile, continues through neighborhood retail channels such as sari-sari stores and street stalls.
Humphrey noted that the Philippines uses paper-based tax stamps with QR codes that consumers and authorities can scan to verify cigarette products.
“Physical stamps, physical tax stamps are a problem because they can be copied and counterfeited quite easily and reused as well,” he said.
“So moving towards digital taxation methods would certainly help. It would help in terms of raising the revenue for governments, and it would help in terms of tracking what’s going on.”
