The Structural Design of Tobacco Control and the Shadow Economy: Revenue Integrity and Illicit Tobacco Trade in Selected ASEAN Countries

Friedrich Schneider () and Alban Asllani ()
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Friedrich Schneider: University of Linz
Alban Asllani: Royal Docks School of Business and Law, University of East London

No 18747, IZA Discussion Papers from IZA Network @ LISER

Abstract: Illicit tobacco trade poses a major challenge to revenue integrity, public health policy and state capacity across Southeast Asia. While policy debates often link illicit tobacco markets to high excise tax rates, this paper argues that illicit trade is better understood as a structural governance problem shaped by the interaction between tax design, regulation and enforcement capacity. Focusing on six ASEAN economies — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — the paper develops a three-pillar framework centred on excise tax structure, regulatory oversight and enforcement systems. The analysis shows that the illicit tobacco trade does not follow a uniform regional pattern. E.g. Indonesia is characterised by domestic evasion and informal production; the Philippines by the benefits and limits of excise reform; Singapore by persistent external supply pressure despite strong enforcement; and Vietnam by brand-specific illicit demand rooted in historical policy choices. Effective control requires predictable, administratively simple tax systems, enforceable regulatory frameworks, stronger supply chain and retail controls, and intelligence-led enforcement supported by cross-border cooperation.

Keywords: illicit tobacco trade; excise taxation; shadow economy; revenue integrity; tobacco control; ASEAN (search for similar items in EconPapers)
JEL-codes: H21 H26 K42 O17 (search for similar items in EconPapers)
Date: 2026-06
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