Category: Featured

North Carolina Revenue Department Disputes Philip Morris in Tax Litigation

Image: andreykr | Adobe Stock
Philip Morris is engaged in a legal battle with the North Carolina Department of Revenue over an $8.7 million tax bill, reports The Carolina Journal. Philip Morris argues that it should be able to claim $7.2 million in tax credits, but the department disagrees.
The dispute centers on the interpretation of a phrase in the state law, with Philip Morris claiming that the law does not limit the amount of credit that can be generated in a given year. The revenue department argues that Philip Morris exceeded the $6 million cap on credits and improperly carried them forward to subsequent tax returns.
“Philip Morris argues the decision in the case will be determined by the meaning of the phrase ‘credit allowed’ found in N.C. Gen. Stat. § 105-130.45. However, this case is about the meaning of six words added to N.C. Gen. Stat. § 105-130.45(b) during a special session convened by the General Assembly,” according to a brief filed by N.C. Department of Justice lawyers. They represent the Department of Revenue in the tax dispute.
“The words ‘may not exceed 6 million dollars’ specifically limited the amount of credits a taxpayer could generate on the exportation of cigarettes,” state lawyers wrote. “The amendment did not disturb the separate and preexisting cap on the amount of credits that a taxpayer could use on its tax return during a single year in subsection (c). Despite a plain reading of the amended language, Philip Morris contends that subsection (b) does not limit the amount of credit that can be generated in any given year and only limits the amount that can be claimed in a tax year. Thus, Philip Morris continued to incorrectly generate credits in excess of the $6 million cap.”
“For tax years 2005, 2006 and 2007, Philip Morris calculated its export credits generated in the amount of $28,767,799; $27,374,957; and $14,310,414, respectively, far exceeding the $6,000,000 limit,” according to the brief. “Philip Morris then improperly attempted to carry forward the unauthorized credits to its 2013 and 2014 corporate tax returns.”
“Through this appeal, Philip Morris now continues to lobby for better treatment than its competitor R.J. Reynolds by attempting to question the statutory construction of an unambiguous statute,” the revenue department’s lawyers argued.
Philip Morris argues that the department’s interpretation of the law is a recent development and not supported by legislative history.
The state Supreme Court is yet to issue a ruling in the case.
June 6, 2023
Smoking Control Bill Poised for First Reading

Credit: Gerey
Malaysia’s Control of Smoking Product for Public Health Bill 2023 will be tabled in Parliament on June 12, reports New Straits Times. The bill includes the generational endgame (GEG) smoking ban, which bans tobacco sales to those born on Jan. 1, 2007, or later.
“We will table the bill for its first reading in Parliament on June 12,” said Health Minister Zaliha Mustafa. Mustafa also noted that the “improved” bill was drafted after numerous engagement sessions with stakeholders.
“I will be meeting with the Parliamentary secretary and the Dewan Rakyat Speaker (on the date for the second reading), and we will see how we can go from there,” said Mustafa.
The bill is reportedly “more comprehensive” than a previous version and also covers “next-generation” smoking products.
Once passed, the bill would prohibit those that fall under the GEG provision from obtaining and using all types of conventional cigarettes, cigars, loose tobacco and rolled cigarettes. Heated products, however, will not be fully banned until after sufficient education and awareness campaigns have been launched by the ministry.
“This is our soft-landing approach to educate the GEG cohort instead of being punitive,” said Mustafa, referring to an earlier, stricter version of the proposal. “For now, we are suggesting that the law be fully implemented (to include all types of smoking products, including electronic cigarettes) in 2030, after conducting further research and studies.
“We think this is a win-win solution. The government is committed to the implementation of the GEG,” she added.
June 6, 2023
U.S. Combustibles Hamper BAT

Photo: BAT
British American Tobacco (BAT) reaffirmed its annual revenue and profit forecasts on June 6, but acknowledged that its performance in the United States has been hampered by weaker cigarette demand.
“I am pleased with our performance in a number of key areas,” said BAT recently appointed CEO Tadeu Marroco in his first trading update. “We increased the number of consumers of non-combustible products by a further 900,000 in Q1, driving good revenue growth and further reducing losses of New Categories means we are on track to deliver our £5 billion [$6.2 billion] revenue ambition in 2025, with profitability in 2024, irrespective of the timing of the transfer of our Russian and Belarusian businesses.
“Outside the U.S., combustible brands have been performing well as we address portfolio gaps and optimize pricing. Consistently driving value from our combustibles brands is critical, as they deliver substantial cash returns and generate value to fund New Categories and our transformation.
“We are also making good progress towards de-leveraging our balance sheet, supporting our ambition to sustainably return excess cash to shareholders.

Returning combustibles to consistent value creation is critical to our multi-category strategy in the U.S.
Tadeu Marroco, CEO, BAT
“That said, there are operational issues that will have my focus. Our performance in U.S. combustibles has been disappointing. Returning combustibles to consistent value creation is critical to our multi-category strategy in the U.S. We are taking action, and while it will take some time to carefully and thoroughly implement our plans, our volume share has grown sequentially since the start of the year.”
BAT has been affected by a voter-approved ban on flavored tobacco products in California, but reported increased sales of flavored products in neighboring states.
BAT has been investing in e-cigarettes and heat-not-burn devices as consumers transition to tobacco-free alternatives. While its Glo tobacco heating product’s volume share decreased, sales of Vuse vapes grew.
However, government regulations and the risk of illicit sales pose challenges to these alternatives, according to BAT.
The company maintains its outlook for a 3 percent to 5 percent rise in 2023 organic revenue at constant currency rates and mid-single digit growth in adjusted earnings per share.
June 6, 2023
Pyxus Exceeds Guidance for 2023

Pieter Sikkel | Photo: Pyxus International
Pyxus International reported sales and other operating revenues of $1.91 billion in 2023, up 16.8 percent from the prior fiscal year. Average gross profit per kilo increased 13 percent primarily due to product mix in Asia and customer mix in North America. Operating income increased $52.1 million to $93.8 million from the prior year. Net loss attributable to Pyxus International was $39.1 million, improving 52.4 percent from the prior fiscal year.
“Our teams achieved strong results for the fiscal year as we exceeded our most-recent adjusted EBITDA guidance, improved our leverage ratios, and aggressively managed our working capital to improve both our operating and free cash flow,” said Pyxus President and CEO Pieter Sikkel in a statement.
“We experienced the third consecutive year of La Nina weather patterns, which limited tobacco supplies and increased tobacco costs by as much as 50 percent in some of our markets. Inflationary tobacco costs, increasing interest rates, and lingering geopolitical issues added to a complicated crop year. We successfully overcame these challenges.”
“We offset reduced production in certain markets by sourcing tobacco from our global network of farmers around the world to meet our customers’ demand for sustainably grown compliant leaf in a short crop year. Uncommitted inventory at year-end was $19 million, which reflects the short-supply and high-demand environment we operated in during fiscal 2023.
Pyxus said it expects the momentum created this year to continue through fiscal year 2024. Current projections reflect a partial recovery of the tobacco supply compared to last year and continued strength in demand and pricing. For the full 2024 fiscal year, Pyxus expects sales to be between $1.9 billion and $2.1 billion and adjusted EBITDA to be between $155 million and $180 million.
June 6, 2023
CTP to Host Regulatory Science Forum

Photo: Lek
The U.S Food and Drug Administration Center for Tobacco Products (CTP) will a hold a forum titled “Advancing Regulatory Science Through Innovation” on June 13-14.
This free, virtual forum is open to the public, industry, academia, patient advocates, sister agencies and current or potential FDA collaborators. Forum attendees will explore how FDA’s researchers use novel science and technologies to inform regulatory decisionmaking.
This year’s keynote address will be given by Murray Lumpkin, deputy director of integrated development at the Bill & Melinda Gates Foundation.
FDA scientific experts and nationally renowned scientists will present and answer questions on improving clinical and post-market evaluation, empowering patients and consumers and advancing products based on novel technologies, among other topics.
To register, click here.
June 6, 2023
Australia: Tougher Tobacco Laws Coming

Image: Tobacco Reporter archive
Australia will face tougher tobacco regulations in the next two years if legislation proposed by Health Minister Mark Butler is adopted, according to ABC News.
The proposed legislation calls for a standardized size for tobacco packets and products, a standardized design for filters, health warnings on individual cigarettes, public health information in loose-leaf and cigarette packets, a ban on flavors and additives like menthol, and a restrictions on certain names used on packaging.
“[There are] names that are designed to mislead users, [that suggest] the cigarettes they are using are somehow going to be good for them, names like smooth or fresh burst,” Butler said. “These things are a cynical deliberate marketing strategy to bring new smokers into this public health menace and will be prohibited in this legislation.”
“The legislation that was put in place by former minister Nicola Roxon had a sunset date of April 1, 2024,” Butler said. “So if we do not pass replacement legislation, the current suite of regulations around plain packaging, graphic warnings and the like will lapse on April 1, so we intended to get this legislation passed by the Parliament before April 2024.”
June 5, 2023
Updates to Tobacco Settlement with DOJ

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Altria, Philip Morris USA, ITG Brands and R.J. Reynolds Tobacco Company sent notices to their retail partners regarding an update on a Department of Justice (DOJ) requirement to supply court-ordered signs to stores that have contracts with the companies, reports NACS.
A settlement agreement between the DOJ and Altria, Philip Morris USA and R.J. Reynolds Tobacco Co. and four cigarette brands owned by ITG Brands was formally approved by a D.C. court in December, resolving litigation over communications of tobacco-related messaging at retail locations.
The court order requires retail outlets that have contracts with any of these companies to post signs carrying one of 17 different preapproved health messages, distributed at random, for a total of 24 months. Each store will be required to rotate to a new message halfway through the time period. The manufacturers will be required to hire auditors to check that the signs are posted correctly.
The notices sent by the companies include amendments to each of the company’s retail merchandising agreements, required by the consent order; additional details around placement of corrective-statement signs at retail; and a summary of implementation activities during the initial posting period.
The court order takes effect July 1, 2023, and tobacco firms have three months to post the corrective statements in both English and Spanish in stores.
June 5, 2023
South Africa: New Tobacco Tax

Image: Tobacco Reporter archive
Nicotine substitute solutions, including vaping products, are now subject to an excise duty of ZAR2.90 ($0.15) per mL in South Africa, effective June 1, reports Business Tech.
The forms that govern tobacco product excise have been amended to account for vaping products, according to the South African Revenue Service (SARS).
Manufacturers were required to apply for and obtain licenses from SARS for manufacturing premises before June 1, 2023, and must submit the first excise duty account by July 28, 2023.
“The tax will be detrimental to those using vaping to stop smoking as well as local small businesses—doing more harm than good,” said Kurt Yeo, co-founder of consumer group Vaping Saved My Life (VSML). “At face value, the tax will move the consumer to the intended purpose of vaping less. But with many of those who vape having switched from smoking to this safer alternative and now having to pay far more for the privilege, they might be forced to revert to smoking as a cheaper option.”
“Moreover,” said Yeo, “the excise overlooks that vaping is the most effective method for smoking cessation. So those who smoke and want to make the change will be dissuaded purely based on the price and will have to continue using the deadliest consumer product on the market, cigarettes.”
Many believe that the tax will lead to an increase in illicit products and growth of the black market, according to DFA.
“This tax is (also) going to wipe out a lot of small vaping businesses, and there is already evidence that it is promoting a black market for vaping products,” said Yeo.
June 5, 2023
Decline in Egyptian Smokers

Image: Tobacco Reporter archive
The percentage of smokers in Egypt decreased from 17.3 percent in 2020 to 16.8 percent in 2022, according to surveys conducted by the Central Agency for Public Mobilization and Statistics (CAPMAS), reports Egyptian Streets.
The data shows that smoking is more prevalent among men, with 33.8 percent of males over the age of 15 being smokers compared to 0.3 percent of women. The age group with the highest smoking rates was 35–45 years old (22.1 percent) followed closely by the 45–54 age range (21.6 percent).
Among those aged 15 to 24, 11.7 percent smoke. There was no significant difference between smoking rates in urban and rural areas.
June 2, 2023
New Zealand to Address Youth Vaping

Image: Tobacco Reporter archive
New Zealand Health Minister Ayesha Verrall is set to unveil the government’s strategy to address youth vaping, reports Stuff.
While an outright ban on cheap, disposable vapes or making them prescription-only has not been promised, Verrall aims to strike a balance between using vaping as a smoking cessation tool and preventing its appeal to young people.
The Australian government recently banned the importation of vapes except through pharmacies and introduced quality standards. Verrall did not confirm if New Zealand would follow suit, but she emphasized the need for a vaping policy that aligns with the country’s specific needs.
Proposed regulations include restricting the location of specialist vape retailers near schools or sports grounds, regulating vape flavor names and implementing safety measures for single-use vaping products. Some experts suggest further measures, such as educating young people and limiting availability to pharmacies.
The regulation of vaping products and retailers was not included in the previously passed legislation to ban tobacco sales to a generation.
The government also plans to reduce the number of places selling tobacco products from 6,000 to 600 as part of their Smoke-Free 2025 action plan.
June 2, 2023