BIR misses tobacco excise tax collection target in 2024

MANILA, Philippines —  The Bureau of Internal Revenue (BIR) missed its tobacco excise tax collection target by more than a quarter as illicit trade continued and became  even more prevalent in the domestic market.

BIR head revenue executive assistant Dondanon Galera said total tobacco excise tax collection last year stood at P134 billion, about P51 billion short of the agency’s P185 billion target collection in 2023.

Total tobacco excise tax collection last year was also relatively flat compared to the P134.91 billion the BIR collected in 2023.

The change in consumption patterns of smokers, including the shift to vape, and the prevalence of illicit trade in the country curtailed the BIR’s capacity to hit its collection target, Galera said.

During a Senate committee on ways and means hearing, Galera admitted that sellers of illicit cigarettes and vape products have become “more brazen” last year.

“They are even selling on online platforms,” he said yesterday.

The BIR conducted at least 141 raids on illegal vapor products and three on illicit cigarettes last year, Galera said.

Philippine Tobacco Institute president Jericho Nograles said the increase in illicit cigarette supply in the country coincided with the uptick in the number of Filipino adult smokers in recent years.

Citing Food and Nutrition Research Institute data, Nograles said the percentage of adult Filipino smokers at the end of 2023 rose to 23.2 percent from 18.5 percent in 2021. This increase mirrored the rise in illicit cigarette trade in the country that reached 19.8 percent in 2023 from 13.6 percent in 2021 based on Euromonitor data, Nograles added.

“Illicit trade thrives due to the availability of untaxed cigarettes sold at a fraction of legitimate products. Legal cigarettes are up to five times (more expensive) than (its) illicit counterparts,” he said.

Nograles said the diminishing state revenues on tobacco excise taxes could be attributed more to tax leakages than the change in consumption patterns from cigarettes to vape.

“The shift is minimal compared to the presence of illicit trade,” he said.

The BIR has been reeling from the illicit trade of tobacco in the country, which contributes to why the agency has been missing its collection target for excise products.

There is also the transition to vape products. The BIR has difficulties in going after illegal ones given that it has become a backyard industry whose production can be done even at home.

Finance Secretary Ralph Recto earlier said the government loses at least P52 billion in revenues because of tobacco and vape smuggling with P35 billion of which being illicit tobacco products.