Category: Taxation

Push to Close Tobacco Advertising ‘Loophole’

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U.S. Senators Jeanne Shaheen and Richard Blumenthal reintroduced the No Tax Subsidies for E-Cigarette and Tobacco Ads Act, which would end a tax provision that allows manufacturers to claim federal tax deductions for the cost of advertising for e-cigarettes and tobacco products, according to Shaheen’s website. Senators Brown, Reed, Durbin, Van Hollen and Merkley also joined in reintroducing the bill.
“E-cigarettes are fueling a public health crisis—particularly among teenagers. E-cigarette and Big Tobacco companies must be held responsible for deliberately advertising these dangerous products to youth,” said Shaheen. “It’s outrageous that a tax loophole allows companies to write off the costs of their ads, having taxpayers foot the bill and subsidize the advertising of harmful products. That’s why I’m reintroducing legislation to close this loophole and hold e-cigarette companies accountable for their harmful marketing practices.”
“Old regulatory loopholes are helping Big Tobacco addict more Americans to lethal products,” said Blumenthal. “This bill will close a gaping tax loophole, putting an end to Big Tobacco’s tax write-offs of dangerous ads and preventing young people from starting up a deadly addiction.”
The bill also bars tax deductions for advertising expenses related to tobacco cigarettes, cigars, snuff, chewing tobacco, pipe tobacco and roll-your-own tobacco.
December 12, 2022
Morocco to Increase Waterpipe Taxes

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Morocco is preparing to increase taxes on waterpipes, reports Morocco World News.
The country’s Finance and Economic Development Committee approved the new taxes on Nov. 9. Following the increase, smokers would pay MAD675 ($63) per kg of shisha smoking material.
The approval comes after a government amendment to the Finance Bill of 2023 extending the tax base to include shisha without tobacco and electronic cigarettes.
Officials said the measure “aims to preserve the health of consumers, especially young adults, and to protect them against the negative effects of consumption and addiction to these products.”
The statement further explains that the imports of tobacco-free shisha are not subject to taxes, although they carry the same health risks as tobacco-based shisha.
The decision to raise the tax is based on World Health Organization research indicating that smoking products containing a mixture of fruits and herbs without tobacco pose a similar risk to tobacco products.
The WHO recommends subjecting such products to the same restrictions and taxes as tobacco products.
According to the Moroccan government, the European Commission classifies herbal mixtures, aromatic herbs or fruits as smoking products.
November 13, 2022
Gold Leaf Tobacco’s Assets Remain Frozen

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A South African court on Nov. 7 postponed a hearing about the frozen assets of Gold Leaf Tobacco until Jan. 30. 2023, reports News24.
At the end of August, the South African Revenue Service (SARS) secured a provisional preservation order in court against Gold Leaf and its directors Simon Rudland and Ebrahim Adamjee. The tax agency suspects Gold Leaf and its directors underpaid tax and hidden assets.
The preservation order prevents the tobacco group and its directors from selling any assets while the tax agency investigates the case.
Gold Leaf and Rudland denied any wrongdoing.
According to the provisional preservation order, the initial return date for the case was Nov. 7. At this hearing, the respondents get to argue why the order should not be made permanent.
Gold Leaf holds the distribution rights for brands such as Voyager, RG, Chicago, Sahawi, Sharp and Savannah.
November 7, 2022
Switzerland Proposes E-Cigarette Taxes

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The Swiss government has proposed new taxes for electronic cigarettes, reports SWI.
Under the plan, reusable cigarettes would be subject to a levy of CHF0.20 ($0.20) per milliliter of liquid, and disposable e-cigarettes would attract a tax of CHF1 per milliliter of liquid regardless of the nicotine content.
The higher tax rate for single use e-cigarettes is intended to deter underage consumption.
The proposal is forecast to bring in around CHF13.8 million in extra tax revenues per year.
Earlier this year, voters supported a ballot to limit advertising for all tobacco products that may be seen by young people.
October 27, 2022
Belgium: One in Five Cigarettes Untaxed

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More than one in five cigarettes smoked in Belgium are untaxed, reports The Brussels Times, citing new research carried out by Cimabel, the Belgium-Luxembourg federation of cigarette manufacturers.
A study of discarded packets and cigarette butts collected between April 18 and May 9 found that 21.8 percent of cigarettes consumed had escaped Belgian tax authorities, accounting for around €700 million ($699.69) in lost tax revenue.
Of the untaxed cigarettes, 1.9 percent were counterfeit. The remaining 19.9 percent were legally brought into Belgium from countries with a lower tax burden. Of the cigarettes purchased outside of Belgium, more than half (51.8 percent) came from Bulgaria. Other countries of origin included Poland (7.8 percent of supply), Turkey (6.88 percent) and Romania (3.67 percent).
During Cimabel’s previous semi-annual survey, which took place in October 2021, the share of untaxed cigarettes was 13.8 percent. The organization attributes the increase in tax-evading tobacco products to drastic tax hikes introduced on April 1, 2022, which have encouraged smokers to find cheaper ways of purchasing cigarettes.
Cimabel urged the Belgian government to refrain from further tobacco tax hikes.
“As long as the federal government continues to drastically increase excise duties on tobacco products each year, the demand for cheap cigarettes will continue to grow, and criminal organizations will continue their illegal practices on Belgian territory,” the federation warned.
September 1, 2022
Gold Leaf Assets Seized

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The South African Revenue Service (SARS) on Aug. 26 took charge of all assets belonging to the Gold Leaf Tobacco Co. and those of its directors following a probe into tax evasion.
According to News24, SARS investigators believe they have evidence that GLTC was involved in in money laundering and may owe up to ZAR3 billion ($177.7 million) in undeclared taxes.
Fearing that GLTC’s assets alone may not cover its possible fiscal debts, the SARS targeted the assets of the assets of GLTC directors Simon Rudland and Ebrahim Adamjee.
Yusuf Abramjee, the founder Tax Justice SA, described the development as a “huge breakthrough in the battle against the illicit cigarette trade.”
“For over a decade, GLTC have been the prime suspects as South Africa’s illegal cigarette trade has grown into a national menace of devastating proportions,” he said.
Rudland and Adamjee told the tax inquiry they had done nothing wrong and declared all GLTC’s taxes to SARS.
The South African press has described Rudland as an “oligarch” associated with Zimbabwean President Emmerson Mnangagwa. “The Rudlands consistently make the news as members of the powerful political and economic elite in Zimbabwe, propping up [Zimbabwe’s governing party] Zanu-PF,” wrote The Daily Maverick.
August 28, 2022
Tobacco Farmers Urge End to Pakistan’s Advance Tax

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Tobacco farmers in Pakistan on Monday urged the government to withdraw PKR380 ($1.76) per kilogram advance tax on the tobacco leaf, otherwise they would stage a protest in Islamabad.
Addressing a press conference at Islamabad National Press Club, president of the Mehnatkash Labour Federation, Ibrar Ullah, said that price of tobacco per kilogram in the open market was PKR256 per kilogram while the advance tax on it was PKR380 per kilogram, according to The News.
He said the advance tax on the tobacco leaf was hurting the sale of the crop in the market and this would render over 15,000 labourers and 20,000 families of the farmers jobless.
The president of the Kissan Board, Rizwan Ullah, also rejected the imposition of the advance tax on the crop, saying the government was destroying the value of the crop through such tactics instead of providing them relief.
He said that all farmers from Khyber-Pakhtunkhwa province would stage a sit-in in Islamabad if the advance tax on the crop was not withdrawn.
Liaqat Yousafzai of the Kashtkar Coordination Council KP termed the imposition of the advance tax on the tobacco crop as “public enmity.”
He said that rates of tobacco were increasing around the world, while they were decreasing in Pakistan.
August 23, 2022
Firms Shun Track-And-Trace System

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More tobacco companies must install Pakistan’s new track-and-trace system to tackle the country’s massive tax evasion problem, according to Project Director Tariq Hussain Shaikh.
Out of the 40-plus companies registered with the Pakistan Tobacco Board, only three—Philip Morris Pakistan, Pakistan Tobacco Co. and Khyber Tobacco—have installed the track-and-trace system that became operational on July 1, reports the Business Recorder.
According to Shaikh, the system has significantly boosted government tax collections in other sectors. In the sugar industry, for example, sales tax collections increased by 34 percent after its implementation at the end of 2021.
Success, however, depends on across-the-board implementation, Shaikh cautioned. Unless more tobacco companies adopt it, the track-and-trace system will not reduce tax evasion, which in Pakistan amounts to PKR80 billion ($335.74 million) per year.
In a letter dated June 30, 2022, Pakistan’s Federal Board of Revenue directed all cigarette manufacturers to apply tax stamps to their products from July 1, 2022. Nine tobacco companies have challenged the directive on technical grounds.
July 28, 2022
Romania to Hike ‘Sin Taxes’

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Romania’s government will increase tobacco and alcohol excise duties as of Aug. 1, aiming to boost public revenue, reports SeeNews. The measure will be followed by a 10 percent tax hike on sugary drinks effective Jan. 1, 2023
The excise duty on tobacco and alcohol has been unchanged since 2015.
The European Union requires member states to impose an excise duty of at least 60 percent of the weighted average retail selling price of cigarettes.
The Romanian government expects the measures to boost budget revenues by RON1.2 billion ($242 million) this year and RON10.57 billion in 2023.
July 17, 2022
Pakistan Mandates Tobacco Track-and-Trace System

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Several tobacco companies are challenging Pakistan’s Federal Board of Revenue (FBR) in court, seeking relief from the country’s new track-and-trace system, according to reports in The International News and Dawn.
Starting this month, all tobacco companies operating in Pakistan must implement the country’s track-and-trace system. Tobacco products may enter the domestic market only if they carry stamps and unique identification markers.
To date, only three tobacco manufacturers—Pakistan Tobacco Co., Philip Morris International and Khyber Tobacco Co. (KTC)—have installed the track-and-trace system and made it operational. KTC Chief Technology Officer Shahid Sattar said the system would help the company enhance its presence in the Pakistani market and improve the quality of its products to international standards.
The companies challenging the FBR want to continue selling old stock. The agency instructed them to discontinue such sales on June 30.
The tobacco companies that are already operating the system maintain that it will succeed only if all players implement it. According to critics, the companies challenging the FBR instructions engage in illicit trade and fear the track-and-trace system will expose their illegal activities.
In addition to the multinationals, there are at least 21 tobacco companies operating in Pakistan, including 18 in Khyber Pakhtunkhwa and three in the country’s federally and provincially administrated tribal areas.
Out of the PKR134 billion ($645.47 million) in taxes collected from the tobacco industry in 2020, PKR131 was paid by two companies, which together held a 65 percent market share.
July 8, 2022