Category: Taxation

  • IQOS under scrutiny

    IQOS under scrutiny

    Government authorities in South Korea said today they would be examining from next month the heated-tobacco product IQOS for any health risks it might pose, according to a Yonhap News Agency story.

    IQOS, went on sale locally in June.

    At a press conference in May called to announce the June launch of IQOS in Korea, Philip Morris Korea was quoted by The Korea Herald as saying that the device’s heated tobacco sticks delivered similar levels of nicotine to that delivered by traditional cigarettes, but reduced the exposure to harmful or potentially harmful chemicals by 90 percent.

    The Yonhap story quoted that the Ministry of Food and Drug Safety as saying it would verify the claims. It said it would measure nicotine and tar levels.

    Meanwhile, heated-tobacco products and electronic cigarettes were said to be ‘under scrutiny for their tax benefits’. These products attracted taxes that were 50-60 percent of those that were levied on conventional cigarettes.

    Opposition lawmakers have introduced a revision to existing rules that would hike taxes on heated tobacco products and electronic cigarettes since, the lawmakers say, they, like conventional cigarettes, use tobacco.

    Their move is supported by the drug safety ministry.

  • Illegal trade on a high

    Illegal trade on a high

    With the arrival in Sri Lanka of record numbers of illicit cigarettes, smoking is on the rise despite the government’s ‘heavy regulations and high taxes’, according to a story by Nishel Fernando for Ceylon Today.

    In an exclusive interview, Ceylon Tobacco Company’s (CTC) MD and CEO Michael Koset told Ceylon Today that smoking in the country was growing slightly year on year because the government’s tax hike had resulted only in a shift in smoking from licit cigarettes to illicit cigarettes and bidis.

    As a result of the government’s tax hike in October and the introduction of VAT in November, the illegal tobacco trade had increased to record levels, he said.

    The illegal trade was estimated to reach about one billion cigarettes this year, which meant that it would account for 30 percent of overall cigarette consumption.

    Last year, the illegal trade was said to have accounted for one percent of overall consumption.

    Koset said that tax hikes hit both the licit cigarette industry and government revenue.

    During the first quarter, 35.6 million illicit cigarettes were ‘detected’, up from four million during the first quarter of 2016. And since only one in 10 illicit cigarettes was detected, an estimated 320 million illicit cigarettes with a market value of Rs16 billion were thought to have entered the market during first quarter of 2017.

    The estimated loss to government revenue due to illicit cigarettes was Rs13 billion during the first quarter.

    At the same time, the licit cigarette sales volume had fallen 29 percent during the first quarter of this year compared to that of the same period of 2016.

    As a consequence of this, CTC’s contribution to government revenue had declined by 11.1 percent to Rs19.7 billion from Rs22.2 billion.

  • Heated-tobacco tax threat

    Heated-tobacco tax threat

    A new bill seeking to impose on heated-tobacco products the same level of taxes as are already imposed on combustible cigarettes has been introduced to Korea’s National Assembly, according to a story in The Korea Herald.

    The Herald indicated that the bill had been introduced because ‘all harmful tobacco products must be regulated the same way’.

    According to the National Assembly’s Bill Information System, Rep. Kim Kwang-lim of the Liberty Korea Party has prepared bills to amend three laws that govern taxation on tobacco products so as to allow equal taxation to be imposed on combustible cigarettes and heat-not-burn tobacco products, such as the IQOS system launched in Korea this month by Philip Morris International.

    Heat-not-burn products are made with processed tobacco leaves, but are promoted as producing far fewer toxins than are produced by cigarettes because there is no combustion process in the case of the former.

    Under current legislation, each pack of cigarettes is subject to 3,323 won ($2.92) in taxes, while each pack of heated tobacco sticks is liable to 1,588 won in taxes. These sums are made up of a number of taxes, such as excise tax, a health promotion fund tax and consumption tax.

    If the three amendments are passed by the National Assembly, consumers of heated-tobacco sticks for the IQOS system will pay an additional 1,350 won in taxes per pack.

  • Tobacco fee proves taxing

    Tobacco fee proves taxing

    Whereas good tax policy includes a broad base of taxpayers to pay for public goods, Oklahoma’s new cigarette fee raises money for state-wide health-care services, but only charges those most in need, according to a piece by Courtney Shupert published on the Tax Foundation website.

    Shupert was addressing Oklahoma’s Smoking Cessation and Prevention Act of 2017, which, she said, might be going up in smoke.

    Although Oklahoma Governor Mary Fallin had signed the act (SB 845) into law on May 31, the constitutionality of the law was being questioned in a pending lawsuit because of its terminology.

    ‘In recent years, Oklahoma has faced severe budget shortfalls, leading to issues in education, infrastructure, and health-care funding,’ Shupert said. ‘Proposed cigarette tax hikes were introduced last year and again during the most recent legislative session to address these budget concerns, but failed to gain enough bipartisan support. Then, during the last week of the session, SB 845 was enacted to bridge a budget gap.

    ‘The new law is straightforward; it raises additional revenue from cigarette sales and funds health care. However, the state’s legislative gridlock and budget issues forced the passage of the cigarette charge as a fee, potentially violating Oklahoma’s Constitution.’

    The upshot is that local businesses and large tobacco companies have jointly filed a lawsuit against the cigarette fee, claiming it is unconstitutional.

    And even some legislators who voted for the bill are said to have found the lawsuit unsurprising, given the hasty passage of the legislation.

    This leaves the state in a tight spot with the pending lawsuit, uncertain tax revenues, and additional budget concerns for the future.

    Shupert’s piece is at: https://taxfoundation.org/oklahoma-cigarette-fee-fire/.

  • Support sought for clinics

    Support sought for clinics

    More than 60 percent of ‘in-patients’ at a South Korean smoking cessation clinic successfully ‘quit’, double the figure for ‘out-patients’, according to a story in The Korea Herald citing the latest findings by the Korean Society for Research on Nicotine and Tobacco (KSRNT).

    The story reported that 216 of the 292 ‘patients’ [74 percent] who joined an anti-smoking program at Dankook University Hospital successfully quit smoking for four weeks.

    Meanwhile, 69.2 percent of those taking part remained smoke free for three months, and 66.7 percent quit for six months.

    At the same time, fewer than 30 percent of outpatients successfully quit smoking after attending the smoking cessation program.

    The KSRNT has called on the government to provide financial assistance to hospitals to help them establish such clinics.

    “It is very hard for even in-patients to stop smoking as nicotine is highly addictive,” Chung Yoo-seok of the research society said, while stressing the need for the government to funnel part of its increased tobacco tax revenue to anti-smoking clinics.

    The tobacco tax revenue rose to 12.3 trillion won ($10.7 billion) in 2016 from 6.9 trillion won in 2014 and 10.5 trillion won in 2015, according to figures produced by the Korea Taxpayers’ Association.

    The government increased taxes on cigarettes by 2,000 won ($1.70) per pack from January 1, 2015, taking the price of a pack from about 2,500 won toto 4,500 won.

    It cited as a reason for the tax increase the need to discourage smoking.

  • ‘Smoke-free’ status sought

    ‘Smoke-free’ status sought

    Malaysia is aiming to reduce the incidence of tobacco smoking in the country to 15 percent by 2025 and to five per cent by 2045, according to a story in The Borneo Post. Some people claim that a smoking incidence of below five percent is indicative of a smoke-free nation.

    There seemed to be no specific new initiatives aimed at reducing the prevalence of smoking, but Health Minister Datuk Seri Dr S. Subramaniam was quoted as saying the ministry ‘would be intensifying efforts to empower and promote overall health to assist smokers to kick the unhealthy habit’.

    Subramaniam said the government had carried out various initiatives to combat smoking, including raising the excise duty on cigarettes, requiring that health warnings were displayed on cigarette packs, and banning smoking in almost all public places.

    “We hope the people will heed the message seriously and co-operate with the government to produce a smoking-free nation,” he told reporters on Tuesday.

    The National Health and Morbidity Survey in 2015 showed that 22.8 percent or five million Malaysians aged 15 and above were smokers.

    Most of the smokers were men, and male smokers were said to make up 43 percent of the group actively contributing to national economic growth.

    Subramaniam said that, on average, Malaysians spent about RM178 a month on cigarettes, while the nation needed to spend RM2.92 billion annually in treating those with diseases linked to smoking.

    “Imagine how much Malaysians would save if they stopped smoking,” he added.

  • Smokers are citizens

    Smokers are citizens

    A smokers’ group is calling on the EU to stop treating adult smokers, who make up 26 of the EU’s population, like second-class citizens.

    Forest EU wants the EU to respect the right of smokers to make informed choices about smoking a legal product.

    These demands are contained in the group’s just-published 2017 manifesto, Smokers Are Citizens Too. The document, described as comprehensive and ‘independent’, looks at the policies affecting smokers and considers what alternative policies governments and EU institutions should pursue.

    The 10-page document, which is the size of a pack of cigarettes, tackles issues such as smoking bans, standardized packaging, excessive taxation and youth education.

    In launching the manifesto, Forest EU’s director, Guillaume Périgois, said that one in four, or 100 million, EU adult citizens smoked.

    “Yet, across the EU, smokers are being punished and ostracised for a habit they enjoy,” he said.

    “This has to stop: Adult smokers should be allowed to make the informed choice to consume a legal product without excessive regulations and oppressive taxation.

    “Forest EU calls national governments and EU institutions to stop treating Europe’s smokers like second-class citizens, cut tobacco taxes, focus on education programs in schools and conduct a review of the impact of the Tobacco Products Directive before any additional regulation is attempted.”

    Key elements of the manifesto are:

    • ‘Smokers represent 26 percent of the population in the European Union.
    • ‘Smokers contributed €81 billion to the public budgets in excise duties in 2015.
    • ‘In January 2017 an average of 79.6 percent of the price of a pack of cigarettes in the EU was duties and taxes.
    • ‘If all cigarettes sold on the black market were sold legally, the budget of the EU and its member states would receive above €10 billion annually.’

    Key conclusions of the manifesto are:

    • ‘Stop treating Europe’s adult smokers like second-class citizens and respect their right to make informed choices about smoking a legal product.
    • ‘Reduce the punitive tax on tobacco and stop encouraging illicit trade. Focus on targeted education programs in schools to make sure children are aware of the risks of smoking from a young age.
    • ‘Conduct an evidence-based review of the impact of the revised Tobacco Products Directive (TPD2) and attempt no further legislation on tobacco before the directive has met its objectives.’
  • Taxing smokers

    Taxing smokers

    Cigarette sales in South Korea have fallen less than they had been expected to during the past two years, while tobacco tax revenue has far outstripped government forecasts, according to a Yonhap News Agency story quoting the Korea Taxpayers’ Association (KTA).

    At the start of January 2015, the government hiked cigarette taxes so that the price of cigarettes rose by 80 percent, from 2,500 won (US$2.19) per pack to 4,500 won.

    At that time, the finance ministry expected the country’s cigarette sales to fall by about 34 percent from 4.36 billion packs in 2014 to about 2.87 billion packs in 2015 and 2016.

    But South Korean smokers bought 3.33 billion tax-paid packs in 2015 and 3.66 billion tax-paid packs last year, which meant that sales were down by 23.4 percent and 15.9 percent respectively from those of 2014.

    The ministry had forecast also that the tax revenue would increase by 2.78 trillion won ($2.44 billion) in 2015 and 2016, measured against the revenue of 2014.

    But the actual sales amounted to 3.53 trillion won and 5.39 trillion won respectively.

    The KTA predicted that the current trend would last ‘for the time being’.

    On the basis that about 1.1 billion packs were sold in the first four months of this year, cigarette sales are expected to reach 3.52 billion packs during 2017, and the tobacco tax revenue is forecast to increase to 11.5 trillion won.

    Kim Sun-taek, head of the KTA, slammed government policy, claiming high tobacco taxes had imposed a big burden on the underprivileged. Various taxes accounted for more than 60 percent of the tobacco price in South Korea, he said.

  • Lower taxes, more revenue

    Lower taxes, more revenue

    Pakistan’s government says that a cigarette federal excise duty (FED) reduction is aimed at convincing smokers currently buying black-market products to switch to duty-paid products.

    It says that currently it is losing millions of rupees in revenue to the widespread availability of smuggled cigarettes.

    But not everyone is convinced. Writing in The News, Syed Anwer Alam said the introduction of a third-tier federal excise duty on cigarettes, which would result in a 50 percent reduction in tax on tobacco products – was likely to increase their consumption in the country.

    Quoting ‘a report’, Anwer Alam said Pakistanis smoked more than 65 billion cigarettes annually, and that more than 100, 000 deaths in the country could be attributed to diseases caused by smoking.

    Pakistan was a signatory to the World Health Organization’s Framework Convention on Tobacco Control (FCTC), which called for ‘price and tax measures to reduce the demand for tobacco’.

    The minimum FED suggested under the convention was 75 percent.

    According to Anwer Alam, a ‘report released by a non-profit organization suggests that the cumulative FED on tobacco products till FY 2016-17 was around 57 percent.’

  • Tax hit on Saudi smokers

    Tax hit on Saudi smokers

    The price of a pack of cigarettes doubled for Saudi Arabian smokers yesterday as the kingdom imposed a first-time tax measure to help fill the revenue hole caused by a drop in oil revenues, according to a Channel News Asia story.

    Residents of the world’s biggest oil exporter were said to have long enjoyed a tax-free and heavily subsidized existence.

    But a collapse in crude prices since 2014 had sparked cutbacks and a search for new revenue.

    The ‘selective tax’, effective from Sunday, raised the price of tobacco 100 per cent, to 18-24 riyals (US$4.80-6.40) per pack.

    Saudi Arabia’s imposition of the new tax follows an agreement among the six Gulf Co-operation Council nations and is said to be in line with International Monetary Fund recommendations.