Category: Taxation

  • Prices set to double

    Prices set to double

    Cigarettes – and alcoholic, energy and soft drinks – are going to be more expensive in Oman from June with the imposition of a new national tax, according to a story in The Times of Oman.

    ‘The Selective Goods Tax Law comes as a result of the Gulf Co-operation Council (GCC) Standard Agreement on Selective Tax, issued in 2016 by Saudi Arabia, the United Arab Emirates, the Kingdom of Bahrain and the State of Qatar,’ the Government Communication Center was reported to have said on Wednesday in a statement.

    ‘This tax shall be levied on goods that have [caused] damage to public health or the environment in varying proportions.

    ‘Selective taxation seeks to achieve a set of objectives, the most important of which is the promotion of healthy lifestyles, the treatment of negative phenomena and practices through the amending of the consumption pattern of individuals, and [the provision of] an additional resource for public finances through the possibility of the tax revenues collected to promote health and social services.’

    The additional tax will increase the price of certain products, including tobacco, by 100 per cent.

  • Fresh thinking needed

    Fresh thinking needed

    A network of tobacco farmers in Thailand is calling on political parties to help ease the impact of a 40 percent rise in cigarette excise tax that is scheduled for October 1, according to a story in The Nation.

    Songkran Pakdeejit, president of the Burley Tobacco Farmers Association of Phetchabun, met yesterday with representatives of various political parties to discuss the effect the proposed new tax rate would have on tobacco growers.

    Songkran said about 50,000 tobacco-grower households in the North, Northeast, and upper Central regions were already struggling because of annual increases in cigarette tax rates. These increases reduced the state-run Tobacco Monopoly’s cigarette sales and, therefore, its production and the amount of tobacco it bought from local growers.

    Growers were very concerned that they were going to lose their livelihoods.

    The network has reportedly asked the authorities to delay enforcement of the next tax rise, but has not received a response.

    But because an election is due to be held in the next two weeks, Songkran asked the parties to recognize growers’ concerns and bring the issue to the attention of their parties.

    At the meeting, the Thai Tobacco Trade Association released a poll result showing most grocery shops were opposed to the tax increase. Jointly conducted by the association and Nida Poll in February, the poll showed 81 per cent of respondents from 1,056 retailers across the country believed the new tax would increase the sale of illicit cigarettes. Ninety-one per cent of respondents said they would be affected by the new tax rate.

    The Association director Waraporn Namat said that in the past four to five years the government had gradually increased the tobacco tax rate in the hope of reducing the number of smokers. “But the number hasn’t decreased significantly and instead they opt for buying illicit cigarettes or tobacco which are cheaper,” she added.

  • Taxing question

    Taxing question

    A Portuguese member of the EU Parliament has asked the Commission for information on how minimum cigarette taxes are arrived at in member states.

    In a preamble to his question, which will be answered in writing by the Commission, Miguel Viegas said Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco made it obligatory for all taxes on cigarettes to be based on a mixed system made up of two components: a proportional (ad valorem) duty, applied to the selling price, and a specific duty, which is defined as a fixed value paid per individual cigarette.

    ‘The Directive allows each country to introduce a minimum tax for each tobacco product category, thus preventing the placing on the market of very cheap brands,’ he said.

    ‘The formula used to calculate the minimum tax varies from country to country, whether in the base price for calculating this minimum tax threshold or the multiplier used. Of course, the choice of method strongly affects how the tax burden is spread between brands.’

    Viegas asked:

    ‘Can the Commission provide a comparative study on the methodologies used in the member states to calculate the minimum tax, particularly with regard to the two main indicators, the most popular price category (MPPC) and the weighted average price (WAP), including the respective multiplier for each?’

  • La la la

    La la la

    Philip Morris New Zealand (PMNZ) is looking for a tax break on its heated-tobacco sticks, according to stories by Madison Reidy for Television New Zealand and Bonnie Flaws for Stuff.co.nz.

    Flaws quoted the PMNZ GM James Williams as saying that the combustible-cigarette excise taxes applied by the Government to discourage people from smoking and recoup the costs associated with smoking were not appropriate for non-combustible products, such as its tobacco sticks, which had less impact on people’s health.

    To motivate consumers to move to these alternative products it was necessary to provide them with information, access and a financial incentive.

    “Unfortunately, our heated tobacco product at the moment is still treated like a combustible product,” Williams was quoted as saying. “It still carries health warnings like it’s a cigarette.”

    Meanwhile, Reidy’s story quoted Williams as saying that PMNZ wanted New Zealand to become the first market free of [combustible] cigarettes.

    “There is no motivation, at all, from anybody within Philip Morris to keep selling cigarettes in New Zealand,” he said.

    But the National Tobacco Control Advocacy Service’s general manager Mihi Blair said the plan was just a bold public relations stunt.

    “If Philip Morris was very serious about it, they would just stop it [selling cigarettes] right now,” said Blair.

    “It is just swapping one addiction to another.”

    Williams said the company could not pull cigarettes from shelves immediately because that would simply force smokers to buy from other manufacturers.

    He said PMNZ wanted to help the government achieve its smoke-free-by-2025 goal, but that the Ministry of Health had refused to meet with him even after he had sent to the agency six binders of scientific information.

    A spokesperson for the Ministry would not say if it had refused a meeting with Williams.

    The Ministry was not aware of the details of PMNZ’s plan to pull cigarettes from New Zealand shelves, the spokesperson added.

  • Smokers get raw deal

    Smokers get raw deal

    Tobacco smoking costs the Irish state 140 times more each year than the amount spent trying to get people to give up the habit, according to a story by Sarah Burns for The Irish Times and quoting the Irish Heart Foundation.

    About €11.8 million was reportedly spent in 2017 on smoking cessation measures including medications, services, the national quit-line and media campaigns, while it was estimated that costs related to the impact of smoking totaled €1.65 billion.

    These figures, which were based on a reply to a parliamentary question and an assessment of the economic cost of smoking in Ireland commissioned by the Department of Health, were published by the Foundation on National No Smoking Day.

    The amount spent helping people to quit was less than one percent of the almost €1.4 billion smokers paid in tobacco tax during 2017, the Foundation said.

    “Nowhere near enough is being done to help the estimated 80 percent of smokers who want to quit,” said Chris Macey, the Foundation’s head of advocacy. “Tax increases have played an important role in reducing smoking rates in Ireland but could be even more effective if a higher proportion of the proceeds was spent on cessation services.”

    “It isn’t fair to place a large additional tax burden on people because of their addiction to nicotine and then fail to invest properly in helping them overcome it when many are desperate to quit.”

    Macey said that putting more resources into smoking cessation services would help to reduce the number of deaths from tobacco-related illness in Ireland, which he said was 16 per day.

  • Age-old problem

    Age-old problem

    A Democratic Progressive Party (DPP) lawmaker in Taiwan said on Sunday that the government should reduce the tax on tobacco because the public was deeply dissatisfied with the current rate, according to a story by Matt Yu, Wang Cheng-chung, Ku Chuan and William Yen for the Focus Taiwan News Channel.

    Hsu Chih-chieh said he had spoken to Premier Su Tseng-chang about this issue because of the public backlash that had erupted after the tax on cigarettes was raised in June 2017 by NT$20 (US$0.65) per pack following the Legislature’s passage of an amendment to the Tobacco and Alcohol Tax Act.

    According to Ministry of Finance data, the amendment allowed the tobacco tax to be raised from NT$590 per 1,000 cigarettes to NT$1,590, which added an extra NT$20 to the price of a pack of 20 cigarettes.

    Hsu said that while he did not encourage smoking, he recognized that it was one of life’s pleasures for some people.

    The tobacco tax went toward the nation’s long-term care of senior citizens, but smokers should not be the ones to fund that, he said.

    In response, the Cabinet said it would seek the opinions of various sectors of the society on the issue.

    The Cabinet spokesperson Kolas Yotaka said Premier Su has received thoughts from DPP lawmakers on the tobacco tax issue but had not yet responded.

    Also commenting on the issue, Kuomintang lawmaker Hsu Chih-jung said the tobacco tax was increased as a deterrent to smoking, and that cutting it now would be counterproductive.

  • Life is taxing

    Life is taxing

    Increasing the excise tax on cigarettes by more than 70 percent to P60 a pack would ‘help’ 3.2 million Filipinos quit smoking, cutting cigarette consumption nationwide by 17 percent, according to a story in The Philippine Daily Inquirer quoting the Department of Finance (DOF).

    The excise increase has been proposed in a bill sponsored by Sen. Manny Pacquiao.

    In a statement issued yesterday, the DOF said Senate Bill No. 1599 included also its joint proposal with the Department of Health (DOH) to increase tobacco excise by nine percent annually following the initial increase.

    At present, the unitary cigarette excise tax stands at P35 per pack, following a scheduled hike in July 2018 under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

    The DOF quoted Finance Undersecretary Karl Kendrick T. Chua as saying that joint simulations of the DOF, the DOH, and the World Health Organization had shown that revenues could start to fall if the excise tax were increased above P73 per pack.

    Because of this, Pacquiao’s proposal at P60 a pack was expected to be ‘beneficial because it would prompt the youth, the poor and other price-sensitive cigarette users to stop smoking,’ Chua said.

    The DOF quoted Health Secretary Francisco Duque III as saying that the Pacquiao bill would prevent about 713,000 deaths and would prompt 3.2 million adults to quit smoking.

  • Tobacco shortfall

    Tobacco shortfall

    Tobacco users’ risk of developing three major types of cancer – lung, larynx and oral – is 109 percent higher than that of non-users, according to a story in The Daily Star citing the results of a recent study.

    The Star story went on to say that tobacco users’ risk of developing seven life-threating diseases, including stroke, heart-disease and tuberculosis, was 57 percent higher than that of non-users.

    And it said the economic loss caused by the health hazards created by both tobacco usage and second-hand smoke was about Tk305.7 billion (US$3.6 billion) per year.

    The study, which involved 10,000 families from all districts of the country, was conducted between July 2017 and April 2018 by the Bangladesh Cancer Society in association with Dhaka University, the American Cancer Society and Cancer Research UK.

    The findings of the study, Economic Cost of Tobacco Use in Bangladesh: A Health Cost Approach, were unveiled at a conference at the Dhaka Club on February 23.

    More than seven million people over the age of 30 are said to suffer from various diseases related to tobacco use.

    The productivity of such people is said to be reduced; they are said to spend a substantial amount of money on treatment and to cause the government’s health-sector spending to rise.

    The idea that tobacco made a significant contribution to the country’s economy was ‘only a misconception,’ the study said.

    The government received TK22.8 billion during the 2017-2018 fiscal year as revenue from the tobacco sector, it said, but the economic loss caused by tobacco use and second-hand smoke was Tk30.6 billion. The latter figure was said not to have taken into effect the environmental hazards caused by tobacco cultivation and smoking.

    To close the gap between income and costs, and to make Bangladesh a tobacco-free country by 2040, the study suggested that Government increased the price of tobacco products by imposing higher tax.

  • Market forces in action

    Market forces in action

    Luxembourg seems to be bucking the trend. According to a story at delano.lu, cigarette sales last year, at more than three billion, were up by 5.86 percent on those of the previous year.

    These figures were provided by Finance Minister Pierre Gramegna, who was responding to a parliamentary question posed by deputy Mars Di Bartolomeo about the sales evolution of cigarettes and other tobacco products in the grand duchy.

    He further asked for a comparison of sales with neighbouring countries during the past decade, specifically noting that cigarette sales in France had dropped by more than nine percent following a “sharp rise” in prices of more than €1 a pack.

    According to the figures provided in Gramegna’s reply, the price of a pack of 20 cigarettes in Luxembourg is €4.20, a price that did not changed between 2017 and 2018, though it had been increased from €3.20 in 2010.

    In France in 2018, a 20-piece cigarette pack retailed at €7.60, providing a price differential of 80.95 percent between France and Luxembourg.

    Also in 2018, pack prices in Belgium and Germany were €5.50 and €4.53, respectively, providing price differentials of 30.95 percent and 7.86 percent respectively.

    The story said that these figures implied that at least part of the increase of cigarette sales in Luxembourg might have been due to cross-border sales.

    The minister was quoted as saying that “the fight against tobacco addiction will be carried on”.

  • Smokers, drinkers hit hard

    Smokers, drinkers hit hard

    South Africa’s Treasury plans to raise an extra R1 billion from increases in excise taxes on tobacco products and alcohol, according to a story in The Business Daily.

    The Daily said that smokers were expected to provide the Treasury with an additional R400 million [presumably in the first year of higher taxes], while drinkers were expected to provide

    an extra R600 million.

    The excise duty on a pack of 20 cigarettes will rise by R1.14 to R16.66, and that on a typical cigar by about 64c to R7.80.

    The Treasury’s plans fly in the face of an appeal made earlier in the week by the recently-launched Black Tobacco Farmers Association (BTFA), which warned that the entire tobacco value chain in South Africa was under threat from illicit traders; a threat that could increase if a proposal to increase excise taxes again were accepted.

    According to a story in The Business Day, it was estimated that close to 50 percent of South Africa’s tobacco-products market was controlled by illicit players, making it one of the world’s biggest markets for illicit tobacco products.

    The illegal trade in tobacco products was said to be costing the fiscus up to R9 billion a year in uncollected tax.

    The BTFA called on the government to keep tobacco excise taxes at their current level to protect jobs on farms.