THE GOVERNMENT should not impose further taxes on the tobacco industry focusing on cracking down on smuggling, an economist said.
“Our main enemy is the smugglers. Higher taxes contribute to higher prices; that’s why illicit traders are encouraged to sell more cigarettes to those in the lower socioeconomic classes. We cannot impose new taxes on the cigarette industry because it only hurts the industry itself as well as consumers,” Alyssamae A. Nuñez, University of Asia and the Pacific economics instructor, said during a forum in Makati City on Thursday.
“High cigarette prices encourage illicit trade. The main enemy we have to combat are the smugglers,” she added.
Foregone revenue due to the illicit trade in tobacco was estimated at P26 billion in 2022.
“There should be more action from the authorities. The government cannot afford to impose new taxes on an industry facing illicit trade,” she said.
Ms. Nuñez said that while these taxes help decrease smoking and increase revenue, the government should ensure an even playing field for the tobacco industry.
“Without effective enforcement in eliminating illicit cigarettes, all efforts in ensuring a level playing field, lowering smoking prevalence and raising revenue all go down the drain,” she said.
Between 2018 and 2022, the illicit cigarette trade is estimated to have reduced gross domestic product (GDP) by an average of 0.39%; lowered average household income by 0.63%; and slashed employment by 4.9%.
“(This) affected employment more than GDP and income. This suggests that illicit trade severely affects the cigarette industry and interrelated industries (from) creating more productive jobs,” Ms. Nuñez added. — Luisa Maria Jacinta C. Jocson