okebet Gatchalian: Smuggled tobacco ‘wreaking havoc’ by funding terrorists

Sen. Sherwin Gatchalian (Senate Public Relations and Information Bureau)

The illicit tobacco trade has prompted heightened concern amongst lawmakers and law enforcement who warn that the proceeds from the unchecked flow of illicit cigarettes are funding terrorist groups, including the Abu Sayyaf.

During a Senate ways and means committee hearing last Thursday, committee chairman Sen. Sherwin  Gatchalian lamented that the illicit tobacco has not only led to declining government collections but has also endangered national security.

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“Another consequence is that profits from illicit trade are reportedly being funneled into terrorism, making this issue not only an economic concern but also a threat to peace and order,” he said.

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Gatchalian noted reports that cigarette smuggling funds terrorists in Mindanao, citing an October 2023 article from the Manila Bulletin. In the report, global security expert Rohan Gunaratna disclosed that cigarette smuggling has become a profitable activity for armed groups in Mindanao.

“By not curbing illicit trade, it’s funding these terrorist groups who are wreaking havoc in our southern borders,” Gatchalian said.

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According to Philippine Tobacco Institute (PTI) President Jericho “Koko” Nograles, while high tobacco taxes aim to reduce smoking prevalence and discourage cigarette consumption, they have inadvertently created lucrative opportunities for illegal operators.

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“The tax evader stands to gain as taxes increase,” Nograles said.

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Nograles underscored the symbiotic relationship between smuggling and terrorism. “In my research for the Anti-Terror Act, I found that terrorism and smuggling go hand in hand,” he said.

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“Cigarette smuggling, which has roots in Southern Mindanao, was also used for the smuggling of bombs and bomb paraphernalia. Cigarette smuggling would pave the way for other kinds of smuggling,” he added.

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Nograles cited Euromonitor estimates showing that illicit tobacco products could account for 19 percent of the domestic market this year. He noted that 51 percent of illicit tobacco products sold in Mindanao are illicit, with some areas exceeding 90 percent.

Meanwhile, tobacco excise tax collections have dropped from P176 billion in 2021 to P160 billion in 2022, P135 billion in 2023, and P130 billion in 2024.

Several factors contribute to the persistence of smuggling, particularly in southern Mindanao.

Bureau of Customs (BOC) Deputy Commissioner Juvymax Uy highlighted the porous nature of the country’s borders where local vessels are not mandated to have automatic identification systems, making them difficult to track.

Additionally, the proliferation of private ports — whose oversight falls under the jurisdiction of local government units (LGUs) — compounds the problem.

Uy noted that in the island provinces, illicit cigarettes are a common sight in Abu Sayyaf camps. He affirmed that nearly all cigarettes found in these camps are illegal.

“The people in the southern borders do not smoke the same cigarettes as those in urban areas,” he said.

Gatchalian urged the Philippine National Police and the National Bureau of Investigation to go after the smugglers or those behind the illicit trade of excisable products.

“There should be a whole-of-government approach,” he said, urging the departments of finance, trade, and health to develop a strategy to address the problem.

“In my opinion, enforcement is not enough. We have to look at the other causes of illicit trade in our country. We cannot ignore the theory of incentives given the significant price difference between illicit cigarettes and legitimate ones,” he added.

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In separate advisories, Shell Pilipinas and Seaoil said the per-liter price of diesel would go up by P2.70, The per-liter prices of gasoline and kerosene would also be more expensive by P2.65 and P2.60, respectively.

Government debt in these countries, which are home to around 40 percent of the world’s population, now stands at an average of 72 percent of GDP – an 18-year high – the Washington-based development lender said.

READ: Gov’t agencies bat for ‘whole-of-nation’ approach to tackle illicit cigarette tradeokebet

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