Category: Taxation

Call for ban by 2025
The government of New Zealand will have to ban the sale of cigarettes if it wants to reach its goal of making the country tobacco-smoke-free by 2025, MPs have been told, according to a story in The New Zealand Herald.
Public health advocates and academics said also that the government needed to encourage more aggressively less harmful alternatives to smoking, such as vaping.
At a briefing on the Smokefree 2025 target at Parliament, Lance Norman, the chief executive of the Māori public health organization, Hapai Te Hauora, said there was no way the target would be reached on existing settings.
Ministry of Health figures show nearly 16 percent of New Zealanders smoke, including 35 percent of Māori and 25 percent of Pacific Islanders.
The overall rate has fallen from 20.1 per cent in 2006.
The smokefree target set by the government requires smoking rates to fall below five percent by 2025.
“We are nowhere near that,” Norman said. “Saying it’s a train wreck for Māori would be an understatement.”
His organization made three recommendations to MPs if they wanted to reach the goal:
- Urgently encourage harm minimization products such as e-cigarettes;
- Ban the sale of cigarettes by 2025;
- Spend more of the revenue from tobacco excise tax on promoting harm-minimization products and supporting vulnerable families.
May 23, 2018
Tax link questioned
Claims by the tobacco industry of a positive association between price/tax changes in respect of tobacco products and the illegal trade in those products are unsubstantiated, according to an article by Guillermo Paraje, PhD for Nicotine and Tobacco Research, published by Oxford University Press.
An abstract of the piece, Illicit Cigarette Trade in Five South American Countries: A Gap Analysis for Argentina, Brazil, Chile, Colombia and Peru, concludes that using simple statistical methods, ‘it is possible to assess the trend in tobacco illicit trend over time to better inform policy-makers’. ‘Getting reliable and regular population consumption surveys can also help to track tobacco illicit trade,’ the conclusion states. ‘Claims by tobacco industry of a positive association between price/tax changes and illicit trade are unsubstantiated.’
Under the heading Implications, the abstract says, in part, that the evolution of ‘cigarette illicit trade in five Latin American countries show different trajectories, not in line with tobacco industry estimates, which highlight the importance of producing solid, independent estimates’.
‘There are inexpensive methodologies that can provide estimates of the evolution of the relative importance of illicit trade and can be used to inform policy-makers.’
May 16, 2018
Seeking tax stability
British American Tobacco Kenya has ratcheted up pressure against further increases in excise duty, according to a story in Business Daily Africa.
BAT Kenya reportedly said on Friday that ‘unpredictable’ tax increases were a threat to its Kenya business.
“We would encourage the government to have a much more stable tax environment so that we can have a more predictable operating environment,” the company’s MD, Beverly Spencer-Obatoyinbo, said in Nairobi.
But tobacco control advocates have been piling pressure on the government to raise taxes on cigarettes from the current Sh2.50 per stick to Sh3.25 per stick, claiming they are still too low to curb tobacco consumption.
“Currently, the average growth in the nominal price of a pack of cigarettes is lower than that of kerosene and food, and therefore cigarette smoking is going up,” said Rodgers Kidiya, the program officer in charge of research and development at the Nairobi-based International Institute for Legislative Affairs.
BAT reported a 21.2 percent drop in full-year net profit to Sh3.3 billion, attributing this to lower sales in the wake of a weak performances on both local and export markets.
May 14, 2018
Following the money
Four municipalities in the Ilocos region of the Philippines that, during the past two years, received the biggest shares from tobacco excise taxes have failed to publicly disclose how the funds are being spent, in violation of budget rules, according to a major Vera Files story by Maria Feona Imperial, Lucille Sodipe and Jake Soriano, published in the Philippine Star.
Candon City, the municipalities of Cabugao and Santa Cruz in Ilocos Sur, and Balaoan in La Union reportedly each received more than a billion pesos in tobacco excise taxes since 2016 but failed to comply with Department of Budget and Management (DBM) memoranda reporting requirements.
LGUs [Local Government Units] that benefit from excise taxes are required to prepare quarterly reports on fund utilization and the status of projects, following a prescribed format. These reports are to be posted within 20 days after every quarter on the LGUs’ websites, and in at least three conspicuous public places.
Two laws, Republic Act 7171 and RA 8240, later amended by RA 10351, provide tobacco-producing local governments 15 percent of total excise taxes collected annually on the sale of tobacco products.
Local governments’ shares in these taxes, which are earmarked to ‘advance the self-reliance of tobacco farmers’, have risen to more than P41 billion since 2016, an election year, when the national government started releasing a windfall of excise tax shares after the sin tax reform law, which imposed higher taxes on cigarettes.
Prior to 2016, the funds were channeled through lawmakers, a scheme that the Supreme Court declared unconstitutional due to post-enactment intervention in the implementation of the national budget.
The budget releases were since accompanied with guidelines on the use of funds and ’emphasized the concomitant posting and reporting (of) requirements to enhance transparency and accountability’.
Yet VERA Files said that it had found that the top recipients of tobacco excise tax shares since 2016 had failed to comply with the DBM’s reporting requirements.
Reports showed also that proceeds from the taxes were being used to fund projects that did not directly benefit tobacco farmers.
Budget Secretary Benjamin Diokno, in an interview with VERA Files, said noncompliance could be grounds for administrative action, including suspension from office.
May 14, 2018
Peru increasing taxes
Peru’s government has increased excise taxes on cigarettes, sugary drinks, alcohol and polluting cars in a bid to tackle public health problems linked to obesity and cancer, while shoring up public resources, according to a Reuters report.
The finance ministry said the tax on cigarettes would rise to 0.27 sol ($0.08) from 0.18 sol each.
The National Society of Industries, a manufacturing association, warned the tax increases would lead to more contraband and pirated goods.
But the government of President Martin Vizcarra, who took office in March, promised to be vigilant in the face of attempts to evade the new taxes.
Addressing the impacts of non-communicable diseases associated with smoking, drinking, obesity and pollution each year cost Peru $24 billion, or about 11 percent of GDP, the finance ministry said, citing a study from Harvard University.
Government spending on health care in Peru was about 3.7 percent of GDP, the ministry added.
Vizcarra’s government said also that it would eliminate some tax exemptions following three straight years of declines in tax revenues caused by a slowdown in economic growth.
May 11, 2018
Illegal trade rising
A ‘significant percentage of Australian smokers’ are consuming illicit cigarettes, according to a Xinhua News Agency story based on a report published yesterday.
The KPMG study showed that while tobacco consumption fell by 6.1 percent between 2016 and 2017, the share of illicit tobacco rose to 15 percent – to 1,248 tons.
In 2009, the story said, illicit tobacco accounted for nine percent of overall consumption.
The consumption of illicit cigarettes was said to be ‘costing’ the federal government up to A$2 billion (US$1.49 billion) in ‘lost’ tax revenue.
But Australia’s excise on cigarettes is expected to raise A$15.6 billion by 2021, up from A$11.2 billion in 2017-18 as excise increases come into effect.
The excise on tobacco was raised by 25 percent in 2010 with eight further 12.5 percent increases legislated to take place between 2013 and 2020. It is currently equivalent to 75 percent of the price of a pack of cigarettes.
Illicit cigarettes are about 40 percent cheaper than are licit cigarettes, while loose-leaf tobacco is 70-80 percent cheaper.
May 3, 2018
Illegal trade alarming
At least a quarter of South Africa’s cigarette trade is illegal, resulting in significant ‘losses’ to the treasury, according to a story in The Business Day quoting the chairman of the Tobacco Institute of Southern Africa, Francois van der Merwe.
Van der Merwe was one of a number of people who appeared before Parliament’s standing committee on finance, which is looking into the illegal tobacco trade.
Also present were representatives of Treasury, the South African Revenue Service, the Financial Intelligence Center, the National Prosecuting Authority (NPA) and the Hawks (the Directorate for Priority Crime Investigation).
Van der Merwe referred to estimates that the treasury had ‘lost’ more than R27 billion in unpaid taxes on tobacco products between 2010 and 2016.
“One of the consequences of tax manipulation by certain players is that the legal, tax-compliant tobacco sector is losing market share to the illegal sector at an alarming rate,” he was quoted as saying. “At least a quarter of the cigarette market in South Africa is illicit with certain channels selling 50 percent to 100 percent illicit product.”
The illegal trade not only affected manufacturers but threatened the sustainability of tobacco farmers, said Van der Merwe, who added that the legitimate tobacco sector contributed R23 billion to GDP, paid about R22 billion in tax and supported 108,475 jobs.
NPA acting special director of public prosecutions Marlini Govender referred to estimates that South Africa ranked among the top five countries in the world with the highest incidence of trade in illicit cigarettes, noting that the profit margin on the illegal trade was very high.
Govender said the illegal trade was a trans-national problem involving neighboring countries and required effective collaboration in the region to prevent consignments crossing South Africa’s borders. The porous nature of South Africa’s borders and the element of corruption that allowed consignments to pass were factors that acted as enablers.
Govender added that collaboration with the private sector and within the criminal justice sector was required.
May 3, 2018
Regulations enforced
The US Bureau of Alcohol, Tobacco and Firearms (ATF) has begun to enforce more aggressively a decades-old law known as the Trafficking in Contraband Cigarettes and Smokeless Tobacco Act, according to a note posted on the California Distributors’ Association (CDA) website.
The CDA said that this move could affect all distributors, but especially those that had a cash and carry business operated from their warehouses, branches, offices, or stores.
It gave details of the information that had to be obtained from purchasers in respect of sales of more than 10,000 cigarettes (50 cartons) or more than 500 single-unit consumer-sized cans or packages of smokeless tobacco in a single transaction at a distributor’s place of business.
‘This rule does not apply to duly licensed distributors who deliver to the recipient’s place of business stamped cigarettes or smokeless tobacco on which applicable taxes have been paid,’ the CDA said.
‘This rule requiring license numbers and driver’s licenses applies when cigarettes or smokeless tobacco is bought at the distributor’s place of business.’
The CDA said that the ATF had advised that its enforcement of the Cigarette and Smokeless Tobacco Contraband Act was expected to expand throughout the entire US. To date, its activities have been primarily centered around Virginia and North Carolina on criminal-oriented activities.
The CDA added that the ATF was not advising distributors in advance when it might arrive at their businesses to review their records.
‘CDA will continue to monitor the situation and will advocate – at a minimum – that the ATF advise in advance when it may visit a distributor’s place of business,’ it said.
April 30, 2018
Passing the butt
The French government wants the tobacco industry to devise a way of disposing of cigarette butts in an environment-friendly manner, according to a story in The Local.
It is particularly concerned about the estimated 30 billion butts that are carelessly thrown away by smokers and that end up littering streets.
The government’s new anti-waste plan, which was announced on Monday, includes 50 measures to help clean up the streets, one of which involves persuading tobacco manufacturers to launch a recycling scheme and to participate financially in collection efforts.
The government is suggesting that tobacco companies increase the retail price of cigarettes by a few centimes a pack as part of an ‘eco-participation’ scheme.
The Local story said that such schemes already existed in France in respect of other products, but the examples it gave, furniture, appliances and electronic goods, did not include any other FMCGs.
But convincing tobacco companies might not be easy given that the government is raising cigarette taxes and, therefore, prices.
Eric Sensi-Minautier, head of communications at British American Tobacco Europe West, reportedly told Le Parisien that whereas his company understood the concern of the authorities, the problem arose from a lack of civic behavior on the part of some consumers.
“Under the pretext of the environment, this is actually a new tobacco tax,” he was quoted as saying. “Making consumers pay for the bad behavior of a few is not the answer.”
Chimirec, a company that specializes in the collection of hazardous waste and that is responsible for gathering butts from collection points around the Paris business district of La Defense, said that the butts were incinerated because the volumes were too low to make it profitable to create a sector dedicated to their recycling.
The full story is at: https://www.thelocal.fr/20180425/france-looks-to-tobacco-companies-for-help-in-cigarette-butt-clean-up-blitz.
April 26, 2018
Reduced risk on hold
British American Tobacco (Malaysia) has said it will not introduce electronic cigarettes or other reduced-harm products in Malaysia until they are the subject of clear regulations, according to a story in The Edge Financial Daily.
“We are a bit concerned that if we do introduce these products, the regulatory framework would not be as sharp as they should be,” BAT Malaysia MD Erik Stoel told a media briefing after the group’s annual general meeting on April 19.
Guidelines were needed on the excise duties and marketing restrictions that would apply to such products.
“Fundamentally, we think that if we can sell potentially reduced-harm products to consumers in Malaysia then we should,” he said, adding that it was the “right” thing to do.
BAT had launched glo, a tobacco-heating device, in Japan in May last year, and had a “very good product portfolio” in Europe’s strong vaping market, Stoel said.
In 2015, several states in Malaysia banned the sale of e-cigarettes after the National Fatwa (religious edict) Council ruled that vaping was forbidden in Islam.
Introducing such reduced-harm products might be the lifeline needed by tobacco companies in Malaysia, which have seen their market size and subsequently their earnings, squeezed by the market for illegal cigarettes.
April 20, 2018