DAVAO CITY (MindaNews / 12 Nov) — The cities of Zamboanga and General Santos registered the highest levels of illicit cigarette trade in the Philippines, attributed to the weak enforcement of security at the maritime borders and longstanding maritime trade relations with Malaysia and Indonesia, according to a study released on Tuesday.

During the presentation of the results of the “Illicit Tobacco Trade in the Philippines: Findings from Sari-Sari Store Surveys and Empty Pack Audits,” a study conducted by the Action for Economic Reforms (AER) and Johns Hopkins Bloomberg School of Public Health, lead researcher Daffodil Santillan said the two Mindanao cities were among the eight cities selected nationwide, chosen for their high population density and the presence of commercial ports that could serve as entry points and distribution hubs for smuggled cigarettes.

During her presentation via Zoom on Tuesday, Santillan noted that the lack of “credible and consistent enforcement” measures in Mindanao may be a key factor behind the two cities’ high incidence of illicit cigarette trade, compounded by “historical, cultural, geographical, political, and economic factors.”

Aside from the two Mindanao cities, the study also covered Navotas, Pasay, and Quezon in Metro Manila; Batangas in Southern Luzon; Dagupan in Northern Luzon; and Mega Cebu in the Visayas, where researchers conducted a randomized audit of 1,000 sari-sari stores to assess 14-day cigarette sales, inventory, and empty pack collection.

“In Mindanao, there are long-standing informal maritime trade interactions and arrangements with neighboring countries like Malaysia and Indonesia. Locals often perceive this as a form of backdoor trading, so it appears that there are challenges in enforcing and implementing regulations due to the presence of informal institutions,” she said.

These findings came after Congress debated proposals to reduce tobacco taxes in January of this year, a move public health experts warn would only worsen smoking rates and would be ineffective in curbing smuggling.

At the 28th BIMP-EAGA Ministerial Meeting and Related Meetings at the Dusit Thani Hotel on Wednesday, Dr. Zunika Binti Mohamed, deputy secretary general of Malaysia’s Ministry of Economic Cooperation, refused to comment on the illicit trading of cigarettes but recognized the need to remove the “negative elements” such as smuggling in the maritime borders to ensure smooth trading between nations.

Bobby Chris Siagan, assistant deputy minister for Indonesia’s Regional Economic Cooperation, likewise declined to comment on smuggling but said they are working on the formalization of customs, immigration, quarantine, and security (CIQS) within BIMP-EAGA, and expressed optimism about expanding cross-border trade with the Philippines.

Janet Lopoz, executive director of the Mindanao Development Authority (MinDA), recognized the need for formalization of processes to address the challenges in the borders.

“Under the CIQS cluster, there is an effort to formalize processes because that’s the problem. Currently, when we have borders without formal processes, challenges arise. One of the ways we address these challenges is through the formalization of our cross-border processes,” she said.

According to Santillan, the results of the survey contradicted claims by cigarette manufacturers in the Philippines that higher taxes on tobacco products have led to an increase in illicit trade.

“The sharp and extreme unevenness in illicit trade between Luzon and Visayas, on the one hand, and Mindanao, on the other, provides evidence that the claim that tobacco taxes explain the rise in illicit trade is not correct. Despite the uniform application of tax throughout the country, there are huge variations in the levels of illicit trade between the cities outside Mindanao,” she said.

The study revealed that Zamboanga and General Santos exhibited “abnormally high levels of illicit trade,” as evidenced by indicators such as cigarette prices falling below the combined excise and value-added tax, violations involving tax stamps, and the smuggling of unregistered brands.

Santillan explained that 79.5% of cigarette packs in Zamboanga and 38.5% in General Santos were sold below the combined excise and value-added tax (VAT), compared with cities outside Mindanao, where the rate peaked at only 7.5% in Batangas.

The study also evaluated tax stamp violations in each city, focusing on cigarette packs with missing or counterfeit tax stamps, based on the empty cigarette packs collected from sari-sari stores.

Among the study areas, she noted that Zamboanga and General Santos recorded the highest rates of violations, at 96.3% and 85.4%, respectively, while the highest recorded outside Mindanao was Batangas, at 8.4%.

She said that the high share of cigarette packs without tax stamps is driven by both unregistered brands and certain registered brands without tax stamps.

The survey also noted the widespread smuggling of unregistered cigarette brands in Mindanao cities, referring to the sale of any brand or variant not listed by the Bureau of Internal Revenue (BIR) under a registered manufacturer, importer, or exporter.

She reported that in General Santos, 329 out of 561 collected cigarette packs, or 58.6% were unregistered brands, while in Zamboanga City, 320 out of 674 packs, or 47.5% fell into the same category.

Zamboanga City Vice Mayor Beng Climaco discussed the challenges of her city in dealing with smuggled cigarettes that entered the city through Jungkong-type watercrafts.

She said illegal cigarettes rob the people twice, “by damaging their health and by stealing public funds that are meant to protect it.”

Climaco said the illicit tobacco trade thrives mainly because of the “porous borders” and the “lack of sustained political will in some areas.”

“Cheap, illegal cigarettes make it easier for more people, especially the youth, to smoke. These products often lack health warnings, proper labeling, and quality control, making them more dangerous to consumers,” she added.

“If you look at the Philippines’ shores, the archipelago is very big and the borders are very big, and there is weak enforcement in our port areas. The study confirms that 47.5% of cigarettes in Zamboanga are unregistered foreign brands, and smuggled from Malaysia,” she said.

She said that there is a need for “stronger and more coordinated response at both national and even international levels  because it’s a border between Malaysia, Indonesia, and the Philippines.” (Antonio L. Colina IV with reports from Bong S. Sarmiento / MindaNews)

The “State of the Illicit Tobacco Trade in the Philippines 2025 Report” by the Action for Economic Reforms (AER) and Johns Hopkins Bloomberg School of Public Health noted the those factors – and not high tobacco taxes as the tobacco industry has long claimed – fueled cigarette smuggling in the two key Mindanao cities.  

The research was based on surveys of more than 1,000 sari-sari stores and an audit of over 7,500 cigarette packs in eight key cities—Dagupan, Navotas, Quezon City, Pasay, Batangas, Mega Cebu, Zamboanga, and General Santos.

“The results found that due to weak enforcement and geographical location … Zamboanga and General Santos (have) the highest prevalence of illicit tobacco trade (in the country),” AER said in a statement.

In Zamboanga City alone, nearly 80 percent of packs were priced below applicable taxes, while up to 96 percent of inspected packs had fake or missing tax stamps, it said.

Meanwhile, the results show that the prevalence of illicit cigarette sales in Luzon, Visayas, and Metro Manila is low.

These findings come after Congress debated proposals to reduce tobacco taxes in January of this year, a move public health experts warn would only worsen smoking rates and would be ineffective in curbing smuggling.

“The results disprove the tobacco industry’s narrative that high taxes cause smuggling,” Daffodil Santillan, AER lead researcher for the study, said. “The evidence shows the real issue is weak law enforcement and regulatory oversight, especially at ports and borders. Lowering tobacco taxes will only make cigarettes cheaper and Filipinos sicker.”

The study emphasizes that tobacco excise tax rates—applied uniformly nationwide—cannot explain regional disparities in illicit trade. Instead, local political will, maritime governance, and enforcement intensity determine where illicit products thrive.

During the study’s launch on Tuesday in Pasig City, Zamboanga City Vice Mayor Beng Climaco sounded the alarm on the growing illicit tobacco trade in Mindanao.

She called it both a public health and fiscal crisis that robs Filipinos “twice” – first of their health, and again of much-needed revenues for hospitals and social services.

“The illicit tobacco trade directly harms both public health and public revenue,” Climaco said.

“Cheap, illegal cigarettes make it easier for more people, especially the youth, to smoke. These products often lack health warnings, proper labeling, and quality control, making them more dangerous to consumers,” she added.

To address illicit trade and protect the gains of tobacco tax reform, AER recommends the following actions:

Upgrading the current tax stamp system into a comprehensive, up-to-date track-and-trace system with physical and digital markers, independent of the tobacco industry; licensing all tobacco retailers, including sari-sari stores, to ensure compliance; empowering the Bureau of Internal Revenue (BIR) to suspend or close violators; and tightening coordination among Customs, BIR, and local governments in enforcement hotspots.

Stem illicit trade at the source by strengthening cooperation, especially with neighboring countries through multilateral and bilateral means, it said.

“Tobacco tax reforms save lives and fund the healthcare of the most vulnerable Filipinos,” Senator Risa Hontiveros, chair of the Senate Committee on Health and Demography, said.

“It’s time to protect public health and public revenues through stronger enforcement. Lowering taxes at this point, when our economy is struggling and [the] government needs revenues, may not be a good idea,” she said in a statement. (Bong S. Sarmiento / MindaNews)