May 28, 2025 l Business Mirror
Influential business organizations have expressed their firm support for the ongoing Cabinet revamp triggered by the dismal performance of the Marcos Jr. administration in the just-concluded midterm senatorial elections. This is the first reshuffle in the executive branch since the “Hello Garci” scandal rocked the Arroyo Cabinet in 2005.
Both the Management Association of the Philippines (MAP) and the Philippine Chamber of Commerce and Industry (PCCI) are calling for merit-based appointments, while the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. (FFCCCII) issued a statement of support for the courtesy resignation of all Cabinet members. The Makati Business Club (MBC) believes there won’t be a major change since the replacement of many top officials could be disruptive.
In the first round of the Cabinet revamp last May 22, all five members of the economic cluster were spared from the chopping block. They are: Trade Secretary Cristina A. Roque; Finance Secretary Ralph G. Recto; Economic Planning Secretary Arsenio M. Balisacan; Budget Secretary Amenah F. Pangandaman; and, Special Assistant to the President for Investment and Economic Affairs Frederick D. Go.
Leaders of the MAP, the MBC, the PCCI and the FFCCCII were unanimous in lauding the President’s decision to retain his economic managers. According to PCCI President Enunina V. Mangio, “they have been instrumental in the continued growth of the economy despite global economic headwinds.” MBC Executive Director Rafael Alfonso Salvador G. Ongpin said their retention “strengthens the continuity and stability of economic policies and initiatives.”
This is the same economic team responsible for tax reforms aimed at enticing foreign direct investments (FDIs) to the Philippines—foremost of which is Republic Act (RA) 12066. Otherwise known as the “Create More” law, RA 12066 lowered the income tax rates of registered business enterprises from 25 percent to 20 percent and granted more fiscal incentives to qualified companies.
The country has been a laggard in Southeast Asia when it comes to attracting FDIs. Data from the United Nations Trade and Development (Unctad) showed that $6.2 billion in FDIs flowed into the Philippines in 2024, compared to Vietnam’s $18.5 billion, Indonesia’s $21.6 billion, and Singapore’s $159.7 billion.
Another tax reform measure being supported by the economic team is House Bill (HB) 11360 seeking the rationalization of excise tax rates on tobacco and vapor products to curb government revenue losses from illicit trade. HB 11360 was passed by the House of Representatives last February and is now being deliberated upon by the Senate ways and means committee.
Tobacco excise tax collections dropped from P176 billion in 2021 to P130 billion in 2024. Meanwhile, adult smoking rose from 19.0 percent to 24.4 percent over the same period, with the number of Filipino smokers rising to 16.4 million today.
Beneath these statistics lies a dark reality: the country’s black market for tobacco and vapor products is thriving. Partly to blame is the current taxation system, which is complex, punitive, and out of step with enforcement capacity. HB 11360 aims to address this gap by simplifying the excise tax structure on vape products and recalibrating the automatic increases on tobacco products.
At the heart of the crisis is a mismatch between tax policy and regulatory enforcement. Based on recent committee hearings at the Senate, up to 80 percent of vape products are now illicit. On the other hand, illicit cigarettes are sold online for as low as P30 per pack while the legitimate brands are retailing between P160 and P225 per pack. No amount of public health messaging can compete with that price differential.
Imposing high taxes is counterproductive and would further fuel the illicit vape industry. A better approach is to simplify the structure, eliminate arbitrage opportunities for smugglers, and apply a rate that will discourage youth use.
Rohan Pike, an Australian security expert who testified at the Senate hearing last May 19, warned that overly aggressive bans on tobacco and vape products—like those attempted in Australia—have fueled not only illicit sales but also violent incidents. This proves that organized crime is increasingly embedded in the black market.
What we need now is a smarter tax system that aligns with the realities of enforcement. As Senator Sherwin Gatchalian has proposed, a full-time inter-agency task force on illicit trade should be established with prosecutorial teeth. The government’s intention to save lives is being undercut by the unintended consequence of making harmful illicit products cheaper and largely unregulated in the underground economy.
***The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX. For comments, email nextgenmedia@gmail.com. Photo is from Pinterest.