Category: Taxation

  • Tax increases ruled out

    Tax increases ruled out

    Of the five major candidates in the May 9 presidential elections in South Korea, four have vowed to freeze cigarette prices and one has pledged to cut them, according to an opinion piece by Park Moo-jong in the Korea Times.

    Hong Joon-pyo, a conservative front-runner, reportedly ignited an online dispute over whether to raise or lower cigarette prices when he said that, if elected, he would cut prices from 4,500 won (about US$4) to 2,500 won a pack.

    In effect, he would return prices to their 2014 level. On January 1, 2015, the government imposed a tax increase that took the price of cigarettes from 2,500 won to 4,500 won.

    “Cigarettes are a thing that low-income people smoke mainly out of anger or because they cannot quit,” Hong was reported to have said. “It is not right to take advantage of this and to empty their pockets, thus fattening the national wallet.”

    The other four major contenders, including Moon Jae-in and Ahn Cheol-soo, are said to have vowed to freeze prices.

    All five candidates have promised in principle that they will use cigarette tax revenue for the promotion of health.

  • Prices taxing for vulnerable

    Prices taxing for vulnerable

    A newly-published review of the literature concludes that cigarette tax hikes unintentionally harm the most vulnerable in society, according to a story by Salynn Boyles published on MedPage Today.

    The review was conducted by Katherine T. Hirono, MPH, of the Center for Health Equity Training, Research and Evaluation in New South Wales, Australia, and Katherine Smith, PhD, of the University of Edinburgh.

    In an interview with MedPage Today, Hirono cited research showing that the most disadvantaged smokers had the hardest time quitting, and the least access to resources to help them do so.

    “At the population level tobacco taxes are very effective, but in every population there will be people who are not able to quit, and they tend to be the most vulnerable in a society,” she said. “What we have seen over time is that strategies that are effective at the population level can further harm these pockets of smokers.”

    Hirono and Smith noted that the smoking rate in Australia was reduced from 24.3 percent in 1991 to 12.8 percent in 2013. But tobacco use, they said, remained much higher – closer to the 1991 levels – among the unemployed, incarcerated, mentally ill, homeless, and abusers of drugs or alcohol.

    They cited a 2016 study from New Zealand, which found that low-income smokers who either couldn’t or wouldn’t quit the habit following large tobacco tax increases faced increased financial hardship, as did their families.

    “Smoking is a coping mechanism for many who continue to smoke, even though that means they are having to go without other household items and even food,” Hirono said. “We can’t ignore this potential unintended consequence of large tax hikes for these smokers and their families.”

    Hirono and Smith said that this increased economic burden had both ethical and health implications, “since financial hardship is a recognized determinant of poor health”.

    Acknowledging that steep tobacco taxes are highly effective, Hirono and Smith argued that policy makers who proposed the taxes had an obligation to take steps to mitigate the equity concerns that arose from them.

    The full story is at: https://www.medpagetoday.com/PublicHealthPolicy/PublicHealth/64764?xid=nl_mpt_DHE_2017-04-25&eun=g220600d0r&pos=1

  • Tobacco seeds zero rated

    Tobacco seeds zero rated

    Azerbaijan has said that the import of tobacco seeds will be exempted from customs duties from the end of May, according to an AzerNews story.

    Earlier, tobacco seeds were included in the ‘others’ category under Group 12 imports, which comprised oily seeds and fruits, other seeds, fruits and grains, hay and feed, and medicinal and technical plants.

    As such, they were the subject to a three percent customs duty based on their value.

    Now, following an announcement by the Azerbaijani cabinet on Monday, tobacco seeds are included in a separate subcategory with a zero rate of customs duty.

  • Mighty pleads for license

    Philippines photo
    Photo by Beegee49

    Hundreds of thousands of people in the Philippines could be negatively affected if the government makes good its threat to close home-grown tobacco company Mighty Corp, according to a story in The Manila Times.

    Retired regional trial court judge, Oscar Barrientos, who is executive vice president of Mighty and the company’s spokesperson, said on the weekend that about 7,000 employees and 55,000 tobacco farmers, along with their estimated 350,000 family members and dependents, relied on the company for their livelihoods.

    He called on the Bureau of Internal Revenue [BIR] to act more responsibly in making statements about Mighty and to take into consideration the repercussions that would be felt following cancellation of the license to operate of the company.

    “The BIR should consider that this case impacts Mighty’s employees, tobacco farmers and their families, as well as suppliers and distributors who depend on the company,” he said.

    Barrientos called on the government to ensure due process for the tobacco firm as it faces charges of tax evasion.

    “We reiterate our pledge to fully co-operate with the government,” Barrientos said. “But while we welcome the filing of these charges as an opportunity to clear the name of the company and its officers, we hope that the BIR will also show prudence in the conduct of its probe of the firm,” he said.

    Earlier, Mario Cabasal, president of the National Federation of Tobacco Farmers Associations and Co-operatives, had said that tobacco farmers would probably bear the brunt if Mighty’s operation were shut down.

    “Most of us depend on Mighty for the purchase of our tobacco,” said Cabasal. “They are our biggest buyer of local tobacco. If the government makes good its threat to close down Mighty Corp, tobacco farmers will bear the brunt of the closure.”

  • Call for tax increase

    Call for tax increase

    About 1.1 million deaths could be prevented during the next 40 years in Malaysia if cigarette prices were increased and other measures put in place, according to a story in The Star.

    Raising the price of a pack of cigarettes from RM17.00 to RM21.50, coupled with other anti-smoking policies, would deter about 2.1 million Malaysians from picking up the habit, according to a study by the Health Ministry and Universiti Putra Malaysia (UPM).

    UPM senior lecturer Dr. Norashidah Mohamed Nor, one of the study’s lead researchers, said the excise tax on cigarettes should be increased from 49 percent to 60 percent, which would increase the price per stick from 40 sen to 64 sen.

    But if the government’s target of a 15 percent smoking prevalence in 2025 was to be met, she said, excise increases would have to be backed by 100 percent enforcement of smoke-free policies, a comprehensive marketing ban, including a ban on point-of-sale promotions, and a mass media campaign on the dangers of smoking.

    As of 2015, about five million or 22.8 percent of the Malaysian population aged 15 and above were smokers.

    Referring to claims that the consumption of illicit cigarettes would rise if licit cigarettes were made more expensive, Norashidah said the study had found this to be inaccurate. She described the demand for contraband as relatively stable. Contraband’s share of the overall market had decreased slightly despite the fact that cigarette excise tax had been increased during the “past years”.

    Last month, Deputy Health Minister Datuk Seri Dr. Hilmi Yaha­ya said raising cigarette prices to RM21.50 a pack was among the measures to be taken to reduce the number of smokers in the country.

    But the Health director-general Datuk Dr. Noor Hisham Abdullah said the scourge of illicit cigarettes would have to be addressed first before increasing the price. “We are discussing with the Immigration Department, Finance Ministry and all the concerned parties before implementing the new price.”

  • Tax at root of cigarette smuggling

    tax photo
    Photo by Got Credit

    Cigarettes that are smuggled into New York, US, account for about 57 percent of the state’s consumption, according to a piece by Joseph Henchman and Scott Drenkard published on the Tax Foundation website and citing a report by the Mackinac Center for Public Policy.

    Henchman and Drenkard list the key findings as:

    • Large differentials in cigarette taxes across states create incentives for black market sales.
    • Smuggled cigarettes make up substantial portions of cigarette consumption in many states, and greater than 25 percent of consumption in twelve states.
    • The highest inbound cigarette smuggling rates are in New York (56.9 percent), Arizona (51.5 percent), New Mexico (48.1 percent), Washington (48 percent), and Wisconsin (34.6 percent).
    • The highest outbound smuggling rates are in New Hampshire (24.2 percent), Wyoming (22.3 percent), Idaho (21.3 percent), Virginia (21.1 percent), and Delaware (20.9 percent).
    • Cigarette tax rates increased in 30 states and the District of Columbia between 2006 and 2012.

    The authors say that policy responses have included banning common carrier delivery of cigarettes, greater law enforcement activity on interstate roads, differential tax rates near low-tax jurisdictions, and cracking down on tribal reservations that sell tax-free cigarettes.

    However, they say, the underlying problem remains: high cigarette taxes that amount to a ‘price prohibition’ of the product in many US states.

    The Tax Foundation piece is at: https://taxfoundation.org/cigarette-taxes-and-cigarette-smuggling-state/

    The Tax Foundation report can be downloaded at: https://files.taxfoundation.org/legacy/docs/FF421.pdf.

  • Australia taxing the poor

    poor photo
    Photo by M.J.H. photography

    Tobacco tax increases in Australia that will see a pack of cigarettes retailing for A$40 might discourage smoking, but will end up having unintended consequences for financially poorer smokers, new research has shown.

    ‘According to our recently-published paper, low-income smokers who continue to smoke will have to spend more of their limited incomes on tobacco, potentially foregoing other household expenses, like food, a story in The Conversation said. ‘Poorer smokers will also be further stigmatised by continuing to smoke.

    ‘We argue that equity issues need to be considered when implementing tobacco tax increases, and revenue raised by tax hikes need[s] to be earmarked for helping low-income communities where smoking rates remain high.’

    The Conversation piece (at https://theconversation.com/tobacco-tax-hikes-are-great-so-long-as-youre-not-a-poor-smoker-75211) goes on to describe how support for tobacco tax increases among public health experts is not universal, and that a report in the UK described how increasing tobacco taxes could increase health inequalities.

    It describes too how the tobacco industry had pushed back against tax hikes, arguing that they led to increased smuggling and diverted enforcement efforts away from other crimes. This, and the industry’s argument that tax hikes harmed the poor, had led to the tobacco industry’s gaining non-traditional allies such as labour trade unions and police to campaign against tax increases.

    While tobacco tax increases were good for the majority, The Conversation piece pointed out, it was necessary to ensure poor smokers didn’t bear the negative impacts.

  • Proposed tobacco tax unfair

    burden photoSenate President, Scott Sales of Montana, US, has said that proposed tobacco tax increases are punitive to the people who are least able to pay, and that the state should not balance its budget on the backs of these people.

    His remarks were reported in the Great Falls Tribune and supported by the paper’s editorial board.

    The Tribune said that the proposed measure, which would raise taxes on cigarettes from $1.70 a pack to $3.20 a pack and on a can of chewing tobacco from $0.85 to $3.20 a can on May 1, was passed in the Senate by a 27 to 22 vote.

    It moved to the House Taxation Committee, which took action on Thursday that would make it extremely difficult to bring the bill to the House for debate and a vote.

    If successful, the new tax was expected to generate about $70 million in funds over the next two years – funds that would go into the state’s general fund.

    Supporters of the bill said the new money would be used to boost the wages of direct care workers serving the elderly and disabled who were covered by Medicaid.

    ‘We support better pay for those workers, but an increased “sin” tax on tobacco users is not the way to accomplish that,’ the editorial said. ‘For that reason, we hope the bill fails.’

    The editorial is at: http://www.greatfallstribune.com/story/opinion/2017/04/07/proposed-tobacco-tax-increase-punitive-unfair/100144310/

  • Leaf tax threat withdrawn

    Leaf tax threat withdrawn

    Zimbabwe’s government has reversed a decision announced last week to levy a 10 percent tax on the gross sales of tobacco farmers who failed to produce tax clearance certificates, according to a story in The Herald.

    The policy reversal was said to have followed a meeting between the Agriculture, Mechanization and Irrigation Development Minister, Dr. Joseph Made, and the Finance and Economic Development Minister, Patrick Chinamasa.

    The Zimbabwe Revenue Authority (Zimra) last week instructed tobacco auction floors to deduct a 10 percent tax on the gross sales of farmers who failed to produce valid tax clearance certificates as at March 31.

    But the announcement seemed set to upset the tobacco selling season when farmers threatened to withhold their crops in protest.

    Made said that the issue had been resolved and he urged tobacco growers to continue delivering their crops to the floors.

    “Farmers had made a plea to government,” he said. “We had a discussion with Minister Chinamasa and I am pleased that we have amicably resolved the matter and reached an agreement that is expected to satisfy farmers and the Zimra.”

  • Kenya proposes tax reduction

    Kenya proposes tax reduction

    A number of organizations have written to Kenya’s Treasury Cabinet Secretary Henry Rotich to protest about a proposal to lower the taxes on unfiltered cigarettes, according to a story in The Star.

    If the proposal were implemented, the prices of unfiltered cigarettes could decline by 28 percent, making them more affordable, said the head of the Consumer Information Network (CIN) Samuel Ochieng.

    ‘This means cigarettes will become more available to children, youths and vulnerable members of our society who are already adversely affected by the economic and health effects of tobacco use,’ CIN said in a letter to Rotich.

    The government recently enacted strong legislation to discourage smoking but, in announcing his budget proposals last week, Rotich suggested a two-tier tax structure of Sh2,500 for every 1,000 filtered cigarettes and Sh1,800 for every 1,000 plain cigarettes. Previously, all cigarettes were taxed at Sh2,500 per 1,000.

    “This will create equity and fairness in the tobacco industry and prevent job losses in the sector,” Rotich said.

    But the head of the International Institute for Legislative Affairs Emma Wanyonyi said the cabinet secretary’s proposal could be illegal.

    Wanyonyi said it contravened the World Health Organization’s Framework Convention on Tobacco Control, which Kenya signed and ratified in 2004.

    The treaty bans preferential treatment for certain tobacco products.