Japan Tobacco International (JTI) is warning that further increases in excise taxes on cigarettes could accelerate the decline of the Philippines’ legitimate tobacco market, potentially creating more room for illicit cigarettes to expand.
Shaiful Bahari Mahpar, director for corporate affairs and communications at JTI International Philippines Inc., said the legal cigarette market is shrinking by about 5 percent annually as illicit products continue to erode legitimate volumes.
“The industry used to be about 43-44 billion sticks, but it’s declining in terms of volume. The legal market is declining and illicit market is there,” Mahpar said in an interview.
He urged policymakers to avoid raising cigarette excise taxes beyond the existing 5 percent annual adjustment mandated by law, arguing that steeper increases could widen the price gap between legal and illicit products.
“When taxes are raised in an unsustainable manner, it will cause a reduction in legal volume and an increase in illicit cigarettes,” Mahpar said.
JTI considers the current annual tax adjustment a normal cost of doing business, he said, but warned that additional increases could put further pressure on legitimate manufacturers while encouraging illicit trade.
The warning comes as the overall cigarette market continues to contract. Despite the decline in industry volumes, JTI held a 51.7 percent share of the Philippine cigarette market as of August, based on Ipsos research.
The company also backed proposals to unify excise taxes on vape products, saying widespread technical misdeclaration of e-liquids can facilitate tax evasion and undermine government revenue collection.
Mahpar said JTI supports measures to curb misdeclaration and strengthen tax compliance across the vaping sector.
At the same time, the company is calling for a sustainable approach to cigarette taxation, arguing that revenue objectives need to be weighed against the shrinking legal market and the continued presence of illicit tobacco.
