ASEAN illicit tobacco surge costs Thailand 45bn baht

Illicit cigarettes are becoming a larger fiscal and enforcement headache across Southeast Asia, with Thailand losing more than US$1.3 billion, or around 45 billion baht, in government revenue over two years, according to a new EU-ASEAN Business Council report.

The report, Inside ASEAN’s Illicit Tobacco Market: Data, Trends, and Emerging Patterns, published in 2026, examines the illicit tobacco market in six major ASEAN economies — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. It found that illicit tobacco products, including cigarettes and e-vapour products, accounted for 23.6% of consumption in ASEAN-6 in 2025, or almost one in four products consumed. The share is projected to rise to 27.8% by 2028.

Illicit cigarettes alone reached an estimated 85 billion sticks in ASEAN-6 in 2025, generating fiscal losses of US$6.3 billion and illicit operator gains of around US$6 billion, the report said.

Thailand among high-risk markets

Thailand is one of the key markets under strain. The report estimated that illicit cigarettes made up 23.6% of Thailand’s cigarette market in 2025, up from 22.6% in 2024. The figure is projected to climb to 26.6% by 2028 if the trend continues.

Government revenue losses from illicit tobacco in Thailand were estimated at US$1.35 billion over 2024-2025, almost entirely from illicit cigarettes. This places Thailand behind larger-loss markets such as Indonesia, Malaysia and the Philippines, but still leaves a sizeable hole in public revenue collection.

The report said most illicit cigarettes found in Thailand are expected to be imported, including duty-unpaid branded products from neighbouring markets such as Cambodia, Malaysia, Myanmar and Laos, as well as counterfeit products linked to Vietnam, Cambodia and China. Thailand and Vietnam were identified as markets where land borders are a primary route for illicit cigarette entry, although sea and air channels are also used.

Price gaps and online access fuel pressure

A key driver highlighted in the report is the price gap between legal and illicit products. In markets where tobacco taxes are high or raised frequently, legal cigarettes become more expensive, creating room for cheaper untaxed products to attract price-sensitive consumers.

Thailand, Malaysia and the Philippines were cited as markets where tax structures and price pressure have coincided with elevated illicit cigarette incidence. However, the report also noted that it assessed market patterns and did not seek to establish a direct causal link between any single factor and illicit trade.

This distinction matters because tobacco taxes remain a core public-health tool. The WHO Framework Convention on Tobacco Control recognises tax and price measures as among the most effective ways to reduce demand for tobacco products, while also stressing the need for strong administration to improve compliance and reduce evasion.

The challenge for governments, therefore, is not simply whether to tax tobacco, but how to design tax systems, enforcement and cross-border controls in a way that reduces both tobacco consumption and illegal-market incentives.

Online channels are adding another layer of difficulty. The report said illicit tobacco products are increasingly accessible through e-commerce, courier shipments and social media-based selling, making detection and enforcement harder as small parcels can resemble normal online retail deliveries.

Track-and-trace gaps remain a weak point

Thailand already uses paper-based tax stamps with QR codes that can be scanned for verification. The embedded information includes manufacturer details, tax payment date, shipment location and price, according to the report.

However, implementation of track-and-trace systems remains uneven across the region. The report said assessed markets had not ratified the Protocol to Eliminate Illicit Trade in Tobacco Products, leaving tracking systems decentralised and creating gaps that illicit traders can exploit.

The WHO FCTC protocol was developed to eliminate all forms of illicit tobacco trade, which it describes as a threat to public health, government revenue and efforts to combat transnational criminal activity.

More than a tax issue

The impact goes beyond lost government income. The report warned that illicit tobacco reduces public funds available for social programmes, pulls demand away from legal businesses, weakens legitimate competition and supports illicit activity and organised crime.

There are also health concerns. Illicit products may bypass regulatory controls, tax stamps, safety checks and standard supply-chain oversight, increasing risks for consumers and making it harder for authorities to monitor the market.

Experts cited in the report’s policy discussion called for governments to strengthen law enforcement, improve track-and-trace systems, deepen international cooperation and consider policies that reduce incentives to shift into illicit products.

For Thailand, the issue is increasingly about balance: protecting public health through effective tobacco control, while closing tax and enforcement loopholes that allow illegal networks to expand.

Without stronger controls, the illicit cigarette market could continue to undermine state revenue, weaken legal businesses and add long-term risks to public health across the region.

Source: Thansettakij