Category: Illicit Trade

  • Tax reduction on hold

    Tax reduction on hold

    Pakistan’s Peshawar High Court on Tuesday issued a stay order against the federal government’s decision to reduce taxes on tobacco products, and directed respondents in the case to submit their responses, according to a story by Hidayat Khan for the Express Tribune.

    The lawsuit was filed by Hameed Khan, a resident of Chota Lahore, through his counsel Babar Khan Yousafzai, who argued in court that the reduction in taxes would make tobacco products cheap in the country and create health hazards.

    It would also result in the closure of local tobacco companies, he said.

    “Some 3,000 employees have lost their jobs over the last four months due to closure of some tobacco units,” the petitioner argued. “They have not taken the stakeholders on board before introducing the third tier of taxation through the Statutory Regulatory Order (SRO).”

    The court accepted his petition for hearing, issued a stay order against the new tobacco-taxation rules and directed respondents to submit their replies by January 18.

    The respondents in the case were said to comprise the government of Pakistan, through the finance secretary, the Federal Board of Revenue (FBR), the Ministry of Justice and the Federal Minister of Health Services.

    Aiming to combat the country’s illegal trade in cigarettes and the consequent ‘massive duty evasion’, the FBR issued the SRO in June to introduce a third tier in the taxation structure of the tobacco industry. The decision, the petitioner feared, would lead to a reduction in cigarette prices and increase demand.

    The plaintiff asked the court to issue an order for revoking the recent SRO and applying cigarette tax at the rate of Rs33.4 per pack.

    He claimed that with the introduction of the third tier of taxation, multinationals were able to sell cigarettes cheaply and increase their sales.

    “High prices are the only way to counter cigarette consumption in the world,” the petitioner told the court. “But in Pakistan, multinationals are given a free hand to reduce prices while benefitting from lower taxation.”

    “Pakistan is the only country where taxes on high saleable brands have been reduced by 33.3 percent,” he argued. “This is also a breach of the World Health Organization’s convention on tobacco control.”

  • Tracking rules adopted

    Tracking rules adopted

    Rules governing the EU’s proposed tobacco-products tracking-and-tracing system have been adopted.

    A press note issued on Friday by DG Sante (the European Commission’s Directorate-General for Health and Food Safety) said that the measures that needed to be enacted to put in place the EU-wide tracking-and-tracing system planned for under articles 15 and 16 of the EU’s Tobacco Products Directive had been clarified in secondary legislation adopted by the Commission.

    ‘The implementing regulation on technical standards for the establishment and operation of a traceability system for tobacco products lays down rules that will ensure that all unit packets of tobacco products produced in, destined for or placed on the EU market will be marked with a unique identifier and their movements recorded throughout the supply chain (from the manufacturer to the last level before the retail outlet),’ the press note said.

    ‘It obliges each member state to appoint an entity (‘ID issuer’) responsible for generating and issuing the unique identifiers, and lays down clear rules to ensure that the traceability system remains fully independent, notably from the tobacco industry, and that functions are carried out impartially.

    ‘The implementing decision on technical standards for security features applied to tobacco products obliges EU countries to require security features, composed of at least five types of authentication elements (including overt, covert and semi-covert), to be applied to unit packets of tobacco products. One of these elements must be provided by an independent third-party provider.

    ‘Member States must ensure they have the necessary means to ensure the authenticity and integrity of the security features.’

    The press note went on to say that EU countries and ‘economic operators’ could now start preparatory work for the two systems of traceability and security features.

    ‘These should be in place by 20 May 2019 for cigarettes and roll-your-own tobacco and by 24 May 2024 for all other tobacco products (such as cigars, cigarillos and smokeless tobacco products).

  • Impacting the illegal trade

    Impacting the illegal trade

    Philip Morris International said yesterday that it had received 157 expressions of interest in its second funding round for PMI IMPACT, its global initiative to support third party projects dedicated to fighting illegal trade and related crimes.

    In a note posted on its website, it said the applications had come from a range of government agencies, public universities, private companies, and not-for-profit organizations across 56 countries of Asia, Latin America, Eastern Europe, the Middle East, Africa, the EU, and the US.

    “The Expert Council is encouraged by the substantial number of responses to our invitation for expressions of interest in combatting illegal trade in all its forms,” said Navi Pillay, member of the PMI IMPACT Expert Council.

    “It is gratifying to receive such sustained support for the initiative taken by PMI IMPACT to get all relevant stakeholders to work together.

    “We will be reviewing the applications and will make a selection of the successful candidates shortly.”

    The second funding round of PMI IMPACT focuses on projects aimed at tackling converging forms of illegal trade such as the smuggling and counterfeiting of goods, human trafficking, and the trade in drugs, arms, and wildlife.

    The second round is due to examine also the links between the illegal trade and related crimes, including corruption and money laundering, and organized criminal networks.

    “We would like to thank all applicants for their proposals,” said Alvise Giustiniani, PMI’s vice president illicit trade strategies and prevention.

    “Our hope is that PMI IMPACT will be a global enabler for innovative projects against illegal trade, and we are encouraged to see this initiative materialize and evolve year after year.”

    ‘Following the review of the expressions of interest, selected applicants will be invited to submit their full project proposals in early 2018 for further evaluation and final selection by the PMI IMPACT Expert Council, a body of external independent experts in the fields of law, anti-corruption, human rights, and law enforcement,’ PMI’s note said.

    ‘PMI has pledged US$100 million for three funding rounds of PMI IMPACT. 32 projects were selected for funding in the initiative’s first round, with allocated grants of approximately US$28 million.’

  • Young buy into illegal trade

    Young buy into illegal trade

    Figures from a new survey show that more than half of all teenage smokers in the north-east of England have bought illicit tobacco products, according to a story in The Conversation.

    The figures, from the 2017 North East Illegal Tobacco Survey, found that 55 percent of smokers between the ages of 14 and 15 said they had bought illicit tobacco products from shops or “tab houses”, while 73 percent said they had been offered illicit tobacco products at some point.

    The Conversation story said there had been cases of illicit tobacco being sold to children from ice-cream vans.

    And sometimes these sales were of single sticks, which were much easier for young people to buy with their pocket money.

    The Conversation reported that because they were generally cheaper than were licit products, illicit products could discourage people from deciding to give up smoking.

    But it busted the myth about illicit cigarettes being more harmful than were licit ones.

    All cigarettes were harmful to health, it said.

    A High Court judgement in 2016 recognised there was no difference in the harm presented by any brand of cigarettes.

    In this way, tobacco control advocates often likened any differences between the consumption of licit and illicit cigarettes as being similar to the difference between jumping out of the 12th or 13th floor of a burning building.

    The full story is at: https://theconversation.com/nearly-half-of-teenage-smokers-have-bought-illegal-tobacco-so-what-are-the-dangers-85558.

  • UK taxing the poor

    UK taxing the poor

    UK campaigners have responded with anger to the announcement of another increase in tobacco duty.

    “This is the second increase this year,” said Simon Clark, director of the smokers’ group Forest. “Tobacco duty is already punitively high. A further tax hike discriminates against smokers who are less well off. Once again the poor are being sacrificed on the altar of public health.

    “The prime minister famously said her government wanted to help those who are just about managing. Instead of helping, the chancellor will push more people into poverty unless they quit smoking or turn to the black market.

    “Thanks to the chancellor more and more smokers will buy illicit tobacco at home or purchase their tobacco abroad. The loss of revenue to the treasury will far outweigh any health benefits to the nation.”

    Meanwhile, the director general of the UK’s Tobacco Manufacturers’ Association, Giles Roca, said there had been, in effect, three tobacco-price increases already this year: that caused by a March-budget increase, that caused by a ban on small packs and that caused by the introduction of a minimum excise tax.

    “Today’s [Wednesday’s] announcement will simply lose taxpayers money, push ever more smokers to avoid paying UK duty and boost the black market and the criminal gangs that operate it,” said Roca.

    “The most effective way to get smokers to quit is not high tax but the development of new products such as e-cigarettes.

    “Also, such an increase, just before the crucial Christmas trading period, will significantly impact on retailers including many corner shops for whom tobacco makes up around 35 percent of their business.”

  • Tracking goes off-piste

    Tracking goes off-piste

    A number of tobacco manufacturers are concerned that the EU wants to allow member states to designate their own product codes as part of a tobacco tracking and tracing system, according to a story by Jonathan Stearns for Bloomberg News.

    The introduction of such a system, which is supposed to track cigarette packages from the factory floor to the retail shelf using electronic codes, has, in principle, been supported by manufacturers.

    But they are said to be unhappy with the European Commission’s proposal to let EU countries deviate from the current industry standard for serial codes on products.

    The Commission says any extra manufacturing costs caused by such deviations would be negligible.

    But the discrepancy is said to threaten to create technical hassles for cigarette manufacturers and undermine track-and-trace technology investments that, in the case of British American Tobacco alone, are said by the company to have totalled £60 million pounds ($79 million) since 2014.

    The tobacco industry would prefer a one-stop shop for European codes.

    It wanted to avoid a non-harmonized ID format that would require different coding standards on the same packaging line, reported Stearns.

    While packs destined for sale in more than one national market in the EU were already differentiated for language and images, differing codes would further complicate production.

    The tobacco industry had expected its deals with the EU’s anti-fraud office to be the basis of the track-and-trace rules stemming from 2014 legislation.

    “Our member companies have already invested hundreds of millions of euros in voluntary co-operation with the EU anti-fraud office to anticipate the need for tracking and tracing,” said Alisdair Gray, secretary general of the Confederation of European Community Cigarette Manufacturers, which includes BAT, Japan Tobacco International and Imperial Brands.

    “The commission proposal paves the way for a highly complex system in which each member state works in isolation from the other.

    “The system has been poorly thought through and may prove unworkable despite having over three years to establish it.”

    Stearns’ story is at: https://www.bloomberg.com/news/articles/2017-11-19/big-tobacco-fumes-over-new-eu-salvo-in-cigarette-smuggling-war.

  • Prices thrown into pot

    Prices thrown into pot

    If the price of legal marijuana must be competitive with black market marijuana to discourage underground sales, then the same logic should apply to nicotine products, according to a ctvnews.ca story quoting the head of Imperial Tobacco Canada.

    Governments across Canada are preparing for marijuana’s legalization in 2018 and are creating legislative frameworks to regulate the industry. Bill Blair, the federal MP tasked with leading the drug’s legalization in Canada, has said the provinces generally agree that the price of legal marijuana should be roughly the same or lower than that of the marijuana that can be found on the street.

    And Imperial’s Jorge Araya said that same rationale should apply to nicotine products.

    Imperial wasn’t lobbying for lower taxes for traditional cigarettes but was against future increases as well as the federal government’s plan to require standardized packaging, he said.

    Araya is lobbying also for a competitive tax regime for what he calls “less-risky” nicotine products, such as heat-not-burn products and electronic cigarettes, which, he says, represent the future of the industry.

    “The first step is to stop tax increases provincially and federally because we are getting to a level where illegal tobacco is booming in the country,” Araya said in an interview after a speech organized by Quebec’s main employers’ association.

    About 70 percent of the price of a pack of cigarettes was taxes, he said, and the illegal market in Canada represented 25 percent of sales and billions a year in lost revenue for governments.

    “We will always advocate for very high taxation with (traditional) cigarettes,” he said. “We have to pay for the externalities and health impacts that we create – what we don’t want is to go higher than we are today,” he said.

    Imperial Tobacco supports Bill S-5, which is making its way through the Senate and would legalize nicotine-containing vaping products in the country.

    But Araya said the company was against the provision forcing companies to have standardized packaging for cigarettes because that would hinder the consumer’s ability to differentiate between products and with the black market.

    Sindy Souffront, spokesperson for Health Canada, said in an email that vaping products, including e-cigarettes and e-liquids that contain nicotine, currently required authorization from Health Canada before they could be imported, advertised or sold in Canada.

    “To date, no such products have been approved,” she said. “Under Bill S-5, manufacturers and importers of a vaping product containing nicotine would not be required to seek Health Canada approval, provided that the product does not make therapeutic health claims.”

    Araya said that Imperial wanted to discuss nicotine products with the government and reach an agreement on how to treat taxation in a “very sustainable way”.

    Meanwhile, a Quebec anti-tobacco coalition said it was misleading to treat tobacco like marijuana because tobacco, unlike pot, was tied to tens of thousands of deaths a year.

    Flory Doucas, the group’s spokesperson, said “the goal of (Araya’s) speech was to rally the business community to the defence and interests of cigarette companies by stoking fear regarding new anti-tobacco measures and to publicize their new products.”

    While Imperial Tobacco is lobbying the government on regulation, it is also waiting for a major court ruling that could force the company to pay hundreds of millions of dollars to smokers.

    In 2015, a Quebec judge ordered three major cigarette companies, including Imperial Tobacco, to pay $15 billion to smokers as part of a class-action lawsuit.

    The companies made arguments to the Quebec Court of Appeal about a year ago and are awaiting a decision.

    Araya said his company isn’t ruling out going to the Supreme Court of Canada if it lost the appeal.

    “Yeah, that’s one of the avenues, to go to the Supreme Court,” he said. “But at the moment that would be speculation. We are very confident about the strength of our arguments.”

  • Victim or villain?

    Victim or villain?

    A recent Transparency International report questions whether the tobacco industry is a victim or driver of corruption in South America, according to a story by Isabela Fernandez for the International Policy Digest, relayed by the TMA.

    The report apparently examines the illegal trade in tobacco products and the lack of a robust and independent track and trace system.

    The industry is said to lose almost 17 percent of its sales to the illegal trade each year.

    And the illegal trade is expected to increase from its current level of 57 billion sticks annually, which will negatively affect tobacco manufacturers and have a significant impact on the collection of taxes.

    The report alleges that the industry hampers regulations that could reduce smuggling and benefit revenue collection for the countries in the region.

    Among the concerns raised are that the President of Paraguay is said to own the Cartesa Group, which allegedly produces most of the brands captured from smugglers.

    In addition, the newly-appointed Chilean Finance Minister was said previously to have been the ‘president of British America Tobacco’, which had been accused of bribing governments in the past to influence tobacco legislation.

    The report concludes that ‘the only way for Latin American countries to break free from the influence of Big Tobacco would be to create a fully independent track and trace system that would provide full transparency over each pack’s journey from factory to store shelf’.

  • Call for tobacco-duty freeze

    Call for tobacco-duty freeze

    There is little public support in the UK for a further increase in tobacco duty, according to the results of a new poll announced yesterday.

    The survey, conducted by Populus for the smokers’ group Forest, found that 76 percent of adults think the current level of tax – more than 80 percent on an average pack of cigarettes – is either about right (44 percent) or too high (32 percent). Twenty-four percent think it’s too low.

    Sixty-eight percent said that buying illicit tobacco was an “understandable” response to the soaring cost of tobacco purchased legally. Twenty-two percent found it “not understandable”.

    “Tobacco duty in the UK is exceptionally high compared to most other EU countries,” said the director of Forest, Simon Clark, ahead of the autumn budget due to be brought down on November 22.

    “Another tax hike will discriminate against the less well-off and those who are just about managing.

    “It will also encourage more smokers to buy tobacco on the black market because there isn’t the stigma associated with other illicit transactions.

    “We urge the Chancellor to give smokers a break, take public opinion into account and freeze tobacco duty at the current levels.”

  • Cigarette traders jailed

    Cigarette traders jailed

    Three people in Fiji have been jailed for failing to pay fines imposed on them for selling loose cigarettes, according to a story in The Fiji Sun Online.

    Altogether, since July last year, 400 people are said to have been booked and issued with spot fines for failing to comply with tobacco control regulations.

    The story said that the ‘strong and effective’ measures implemented by the government had led to a major decline in smoking among teenagers, as measured by the Global Youth Tobacco Survey (GYTS).

    The current smoking prevalence rate among 13-15-year-olds in Fiji was said to be 5.1 percent: 6.8 percent in the case of males and 3.4 percent in the case of females.

    The GYTS report of 1995 put the smoking rate among this age group at 10.4 percent.

    Meanwhile, the story reported that the Ministry of Health and Medical Services had declared eight villages, 39 village community halls, a number of workplaces and all major markets tobacco free.

    The ministry is now reviewing current tobacco legislation with an eye to making further amendments in relation to outdoor smoking restrictions and the illegal trade in tobacco products.