Category: Taxation

  • 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.”

  • Indonesia to tax e-liquids

    Indonesia to tax e-liquids

    Indonesia’s Director General of Customs and Excise, Heru Pambudi, has said that electronic cigarette liquids will be subjected to an excise duty of 57 percent starting in July next year, according to a story on tempo.co.

    The imposition of the tax was described as the government’s effort ‘to regulate’ vaping.

    “The main ingredient of the vape liquid is tobacco, which is a taxable object according to the Excise Law,” Heru said during a press conference at the Finance Ministry in Jakarta on Thursday. “Its consumption must also be limited.

    “The bottom line is that this is done to prevent underage children from misusing this product.”

  • BAT leaving Philippines

    BAT leaving Philippines

    British American Tobacco is due to close its operations in the Philippines by the end of December amid a ‘difficult environment’ and after its failed attempt to buy into the local cigarette manufacturer Mighty Corporation, according to a story in The Manila Bulletin.

    The Bulletin report said that its sources had confirmed that BAT Philippines had started winding down operations after Japan Tobacco International (JTI) acquired Mighty for P46.8 billion in September.

    “JTI’s acquisition of Mighty was a really big, big let-down for BAT because they were already at an advanced stage when the Japanese came at the eleventh-hour,” an unnamed source was quoted as saying.

    “The Wongkuchings even wanted BAT to buy their company, but they had no choice after they made one big mess.”

    The government had filed three tax claims against Bulacan-based Mighty and its top executives for a total of P37.9 billion in allegedly unpaid excise taxes. The Justice Department has now dismissed the complaints.

    BAT Philippines confirmed its forthcoming closure, saying the company had been ‘operating in a difficult environment for some time’.

    ‘Given our small-scale operation, the highly consolidated nature of the market in the Philippines and the lack of inorganic opportunities, we have concluded that it is not sustainable for us to maintain a presence in the market,’ the company said in a statement to the Bulletin. ‘Consequently, we will be closing our current operations by the end of the year.’

    BAT Philippines said the priority was to support impacted colleagues. ‘The company will continue to monitor market and industry developments and, if the conditions are right, is open to the possibility of investing in the Philippines again in the future,’ it said.

    This will not the first time that BAT has pulled out of the Philippines’. In 2009, the company left the country after an unfavorable decision by the Supreme Court in respect of its Pall Mall brand. BAT claimed that the domestic industry did not comprise a level playing field.

    But in 2012, BAT re-established its presence in the country amid plans of the Aquino administration to pass a new excise tax law that was aimed at creating a level playing field by removing the tax distinction between cigarette brands that were established on the market and those that were ‘new’.

    BAT Philippines has a one-percent share of the Philippines’’ 100-billion stick tobacco market.

    On its return more than five-years ago, the company announced it would invest $200 million in the country. James Michael Lafferty, BAT Philippines’ country general manager said in September 2014 that BAT had already “crossed the $100-million mark” in terms of its investments.

    Lafferty said the amount was spent mainly in improving the distribution aspects of their business.

  • Illegal trade boosted

    Illegal trade boosted

    The Indonesian Cigarette Manufacturers Association (Gappri) has said that tobacco excise hikes during the past three years have resulted in an increase in illegal cigarette trade in Indonesia, according to a tempo.co story.

    Gappri’s chairman Ismanu Soemiran was quoted as saying that licit cigarette production had declined in the years following the hikes. “In the past three years, it declined one percent per year,” he said.

    “If tobacco excise duty increases next year by 10.04 percent, cigarette production will drop by two to three percent. It would open up even more avenues for illegal cigarette trade.”

    In 2010, the illegal cigarette trade was said to have accounted for 6.2 percent of the Indonesian market. That figure rose to 8.4 percent in 2012, 11.7 percent in 2014 and 12.1 percent in 2016.

    Ismanu said that another cigarette excise duty increase would make more smokers seek cheaper, illicit cigarettes.

    But he said he expected the government to review its plan to increase tobacco excise duty next year.

  • Illegal trade undercut

    Illegal trade undercut

    A recent study by KPMG has found that one eighth of the cigarettes consumed in Morocco last year were illegally traded, according to a story in The Morocco World News.

    Smuggled cigarettes enter Morocco from its neighbors, Algeria and Mauritania, with Algeria accounting for 65 percent of the inflow even though the border with Algeria has been officially closed since 1994.

    A pack of Marlboro cigarettes sells in Morocco for US$3.38, while a pack smuggled from Algeria sells for US$1.91 and a pack smuggled from Mauritania sells for US$1.35.

    The KMPG study found that one of the reasons for the relatively high level of illicit cigarette consumption in Morocco is that cigarettes – 38 percent of them – are sold as single cigarettes.

    It is estimated that if consumers smoked licit rather than illicit cigarettes, the government would benefit from additional tax revenue of about US$143 million a year.

    Morocco has had some success in reducing the illegal trade through increasing law-enforcement and border-security activities.

    And the introduction in 2015 of lower-priced brands that sell for the same price as illicit products has aided the decline of the illegal trade. In fact, sales of licit cigarettes increased by eight percent in 2016.

  • HNB tax rise endorsed

    HNB tax rise endorsed

    A South Korean parliamentary committee has endorsed a bill aimed at raising the tax on heat-not-burn (HNB) cigarettes, according to a story in The Korea Times.

    The story, quoting ‘industry sources’ said the proposed rise would increase the retail price of the consumable element of HNB products, such as Philip Morris’ Heets and BAT’s Neostiks, from 4,300 won ($3.78) to 5,000 won a pack.

    Most combustible tobacco cigarettes retail for 4,500 won a pack, of which 3,323 won is tax.

    The National Assembly’s Strategy and Finance Committee passed the revision bill to the tobacco tax code on Friday. If the bill passes a forthcoming parliamentary plenary session, the higher tax will be implemented from mid-December.

    Philip Morris Korea confirmed that the proposed tax hike would push up the retail price of Heets, though it did not say by how much.

    A BAT Korea official said that the tax rise, as proposed, would have a huge impact, and that, BAT would have to think about increasing its prices.

    And KT&G expressed concern about the pricing of its new HNB device, LiL.

    But the Minister of Strategy and Finance, Kim Dong-yeon, said the chance of a price hike was low. Kim said the tax levied on HNB products in Japan was 80 percent of that levied on regular cigarettes, and HNB products were sold there for 460 yen, which was similar to the price of regular cigarettes.

  • Tobacco tax over-inflated

    Tobacco tax over-inflated

    Echoing back a phrase made famous by the Prime Minister, Theresa May, campaigners in the UK are urging the Chancellor to help consumers who are “just about managing” by rejecting a second increase in tobacco duty this year.

    According to the smokers’ group Forest, tobacco duty costs those with low incomes a far larger proportion of their income than it does those on higher incomes, and further hikes, it says, would only exacerbate this unfairness.

    ‘Measuring expenditure on tobacco duty as a percentage of disposable income, in 2015/16 tobacco duty cost the average household in the lowest-income bracket almost eight times what it cost the average highest-earning household,’ Forest said in a press note issued today.

    ‘Although the average household among middle-earners spent 38 per cent more on tobacco duty than the poorest households; as a percentage of disposable income the poorer households were still worse off.’

    Tobacco duty, says Forest, costs the poorest households 2.3 percent of their disposable incomes compared to 0.3 percent in the wealthiest households.

    “Tobacco duty is a regressive tax because it hurts low income households more than the average household and far more than the wealthiest households,” said Simon Clark, director of Forest.

    “In order to help those who, in Theresa May’s words, are ‘just about managing’, we urge the Chancellor to resist the temptation to increase tobacco duty for a second time this year.”

    Meanwhile, Forest claims that the use of a ‘flawed’ measure of inflation has cost smokers an additional £1.35 billion in tobacco duty since 2010.

    According to the group, the practise of increasing tobacco duty using the retail price index (RPI) rather than the consumer price index (CPI), which experts believe is a more accurate measurement of inflation, has resulted in smokers being unfairly overtaxed.

    The duty escalator, which was reintroduced in 2010, increased the price of tobacco every year by inflation plus two per cent. Inflation, says Forest, was calculated using the RPI not the CPI. This, says the group, has resulted in smokers paying even more duty than they should reasonably have been expected to pay.

    Forest estimates that smokers were overtaxed by almost £46 million in 2010/11, rising to £252 million in 2016/17. The forecast for 2017/18 is almost £310 million which means smokers will have been overtaxed by more than £1.35 billion since 2010.

    “Smokers have been punished enough for their habit,” said Clark. “Tobacco duty is already scandalously high without the Chancellor using a flawed measure of inflation to extract even more money from the pockets of law-abiding consumers.”

  • Tax-stamp roll-out deferred

    Tax-stamp roll-out deferred

    The government of the Philippines has postponed until next year the release of newly-designed cigarette-pack tax stamps because it is still working on enhancing their security features, according to a story in The Philippine Star quoting the Department of Finance (DOF).

    In an interview with the Star, Finance Undersecretary Antonette Tionko said the government had moved its deadline for the roll-out of the stamps to January 2018 from the original target of November this year. This was because the security features were still being ‘tweaked’.

    Meanwhile, Teresita Angeles, the Bureau of Internal Revenue’s assistant commissioner and officer in charge of the Large Taxpayers Service, said the security features of the new stamps were still being ‘enhanced and tested’.

    The Star story said the ‘cost’ of the stamps would increase from P0.13 per piece to about P0.15 per piece.

    The Finance Secretary Carlos Dominguez was quoted as saying that the government had set out to redesign the tax stamps because their security features had been compromised by counterfeiters.

    He said the new stamps would help curb smuggling and plug the revenue leakages caused by the proliferation of fake tax stamps.

  • Double vision on taxes

    Double vision on taxes

    A proposal by the Philippines senator Manny Pacquiao to hike taxes on tobacco products needs to be backed by further studies, according to an ABS-CBN News story quoting senator Sonny Angara.

    Last week, Pacquiao filed a bill that, if passed, would increase the tax on cigarettes from P30 per pack to P60 per pack, and then increase it by nine percent each year.

    Angara said that the Senate Committee on Ways and Means, which he chairs, would consider the proposal ‘as soon as the appropriate government agencies have submitted additional and substantial studies and analysis’.

    ‘It is important to note that the sin tax law already provides for an automatic indexation of tax rates, meaning they go up every year as it is,’ Angara said in a statement.

    Angara said that revenues from the sin tax law had been increasing since its enactment in 2012, but that they had fallen in 2016, despite higher excise tax rates.

    He said the government needed to determine why this had happened before considering changes to tobacco taxes.

    ‘The sin tax collections fund our PhilHealth premiums that enabled the government in recent years to cover more beneficiaries,’ Angara said. ‘We don’t want to see a decline in the funding that will reduce the benefits for PhilHealth beneficiaries.’

    Pacquiao is reportedly planning to introduce the bill during the period of amendments in November, when senators finalize their version of the first package of tax reforms.

  • E-cig imports double

    E-cig imports double

    Imports of electronic cigarettes into South Korea more than doubled after the government raised taxes on conventional tobacco at the beginning of 2015, according to a story in The Korea Herald citing government data.

    Industry sources attributed the sharp rise to smokers switching to e-cigarettes, which currently are exempted from the level of taxes imposed on traditional tobacco cigarettes.

    The government increased taxes on cigarettes by 2,000 won (US$1.70) per pack from January 1, 2015, raising the pack price to 4,500 won.

    And in 2016, it compelled tobacco companies to place graphic health warnings on the upper part of cigarette packs.

    Imports of electronic cigarette liquids were said to have reached 243 tons or 16 billion won (US$13.9 million) between January 2015 and August this year, according to figures from the Korea Customs Service. The figures for the period from January 2012 to August 2014 were 91 tons and 6.7 billion won.

    Imports of e-liquids containing nicotine hit 61 tons during the first eight months of this year, up from 12 tons during the first eight months of 2015 and 22 tons during the first eight months of 2016.

    And imports of vape kits increased to 269 tons, or 25.6 billion won, between January 2015 and August this year, up 55.5 percent from 173 tons and 79 percent from 14.3 million won between January 2012 and August 2014.