Category: Taxation

  • Bangladesh Urged to Raise Cigarette Prices

    Bangladesh Urged to Raise Cigarette Prices

    Photo: Shahadat222

    Anti-tobacco organizations are urging Bangladesh to increase cigarette prices in fiscal year 2024–2025, reports The Business Post.

    Even as the prices of essential goods have soared, cigarette prices have remained comparatively stable in Bangladesh. Over the past five fiscal years, the price of low-tier cigarettes has increased by only BDT10 ($0.09), averaging an increase of BDT2 per year. Since 2019–2020, the price of such cigarettes has increased only once, by BDT1.

    Critics say the failure to adjust cigarette prices in line with inflation has made smoking more accessible and attractive to low-income groups. Low-tier cigarettes now account for 80 percent of the cigarette market.

    Experts have suggested raising the price of a 10-stick pack of low-tier cigarettes from BDT45 to BDT60. Aligning prices with inflation, they suggest, would increase government revenue by approximately BDT100 billion.

    “Low-income individuals are the most affected by malnutrition,” said Nasrin Sultana, a professor at the Institute of Health Economics at Dhaka University. “Increasing the price of low-tier cigarettes would reduce the number of smokers in this demographic. This would not only decrease health risks but also enhance revenue flow even amid economic downturns.”

  • Pakistan Urged to Raise Tobacco Taxes

    Pakistan Urged to Raise Tobacco Taxes

    Image: alexlmx

    Health activists want Pakistan to increase its Federal Excise Duty (FED) on cigarettes to 70 percent of retail prices, in line with international standards, reports Dawn. Achieving that level requires a rate hike of 37 percent.

    According to proponents of the measure, raising taxes would not only reduce the burden on Pakistan’s healthcare system, but also earn the government much-needed revenue. They calculate that a 37 percent FED hike would generate an additional PKR60 billion ($215.7 million) from cigarettes for 2023-2024. Revenue collections from July 2023 to January 2024 reached PKR122 billion, with full year estimates exceeding PKR200 billion.

    Backers of the increase reject tobacco industry arguments that tobacco tax hikes fuel illicit trade, suggesting that tobacco firms manipulate their reported production to influence tax policy.

    According to activists, some 31.6 million adults currently use tobacco in Pakistan, resulting in more than 160,000 deaths every year, while smoking-related illnesses and deaths cost the country at least 1.4 percent of its GDP annually.

    Antismoking groups are also urging the government to embed healthcare cost-recovery in tobacco tax policy through automatic adjustments to excise taxes, ensuring that they cover a certain percentage of the total health costs attributable to smoking.

  • Khyber Pakhtunkhwa Mulls Steep Tax Hike

    Khyber Pakhtunkhwa Mulls Steep Tax Hike

    Photo: Taco Tuinstra

    Pakistan’s Khyber Pakhtunkhwa government is mulling an increase in the local tobacco tax (cess) by 400 percent, reports Pakistan Today. The increase is expected to generate revenue of more than PKR2 billion ($7.2 million) annually.

    A meeting between Muzammil Aslam, advisor to the chief minister of finance; Aqibullah Khan, provincial minister for irrigation; Akmal Khatak, director general of excise; and a representative delegation of tobacco growers approved a proposal to increase the tobacco development cess by PKR50 per kilogram for Viginia tobacco, PKR30 per kilogram for white leaf rustica tobacco and PKR20 per kilogram for niswar tobacco.

    The tobacco development cess is not equal to the actual price of tobacco, the meeting was informed. Various proposals are under consideration to increase the cess. An action plan for exports is being prepared to increase income from tobacco exports, according to Aslam.

    The provincial government currently earns PKR500 million annually from tobacco taxes.

  • Contraband Crackdown to Boost Russian Budget

    Contraband Crackdown to Boost Russian Budget

    Photo: Sabphoto

    Recent measures to strengthen control over the tobacco market could significantly boost Russia’s budget, reports Interfax, citing comments by Finance Minister Anton Siluanov.

    “Together, we estimated that the volume of funds mobilized from measures to control the tobacco market could reach about 150 billion rubles [$1.64 billion]. This is a significant amount of a resource that we now need,” Siluanov said at an April 2 meeting of Rosalkogoltabakkontrol, which assumed regulatory authority over the production and circulation of  tobacco and nicotine-containing products on March 1.

    Tax-avoiding products accounted for 13 percent of Russia’s tobacco market in 2023, up from 11 percent in 2021, according to Siluanov.

    Rosstat data show that tobacco companies produced 198 billion cigarettes in 2023, which is 10.7 percent less than the previous year. In response to Russia’s invasion of Ukraine, some multinationals have exited the market.

    Tax authorities expect to collect RUB824.152 billion in excise taxes from tobacco products this year.

    As part of its new responsibilities, Rosalkogoltabakcontrol must identify and stop the illegal production and trafficking of tobacco and nicotine-containing products. In addition, it will monitor manufacturer compliance with licensing and mandatory requirements for production, supply and the purchase and transportation of raw materials and finished products.

  • Russian Resolve

    Russian Resolve

    The Chestny ZNAK system tracks items from production to real-time sales. | Photo: CRPT

    A supplier of product labeling solutions claims its technology had helped shrink the Russian illicit cigarette market by a quarter.

    By Marissa Dean

    The black market and illicit trade are hot topics. Confronted with ever-rising taxes, consumers of tobacco products in many markets are increasingly tempted by more affordable black market offerings. Many places are adjusting and implementing technologies and processes to help curb black market trade. Russia is one of these areas, having recently been listed by the World Health Organization among the countries with policies providing the highest level of protection for its citizens from tobacco.

    During a side event at the third Meeting of the Parties (MOP3) to the Protocol to Eliminate Illicit Trade in Tobacco Products, officials gave a presentation on Russia’s Chestny ZNAK track-and-trace system. The event, which took place on Feb. 13 in Panama, was aimed at familiarizing the parties “with proven approaches to ensuring traceability of tobacco products in accordance with Article 8 of the protocol,” according to Revaz Yusupov, deputy general director for the Center for Research in Perspective Technologies (CRPT) in Moscow. “Special attention during the presentations was given to the impact of the system on reducing the illicit tobacco trade in Russia. Representatives from Nigeria, Brazil and Panama were present at the event, facilitating discussions on the potential implementation of the system in their respective countries.”

    Introduced by the CRPT in 2019, the Chestny ZNAK system tracks items from production to real-time sales. According to Yusupov, the system is the first of its kind globally. “The fundamental approach involves assigning a unique digital data matrix code to each product,” explained Yusupov. “This code undergoes scanning at every stage, spanning from production to sale. The entire product journey is traced through electronic document management and online cash registers, mandated by law across the country.”

    Products with the assigned digital codes are deemed legal, complying with all requisites and documentation. Attempting to illegally introduce goods into the Russian market without proper documentation and labeling is “impractical,” according to the CRPT, because of the success of the Chestny ZNAK system—the digital codes are safeguarded by cryptographic protection, which makes forgery impossible.

    The information about the products within the system is tamper-proof as well, according to the CRPT, and the system blocks the sale of expired goods or goods lacking proper documentation. Currently, 667,000 companies and individual entrepreneurs use the system, which boasts a processing capacity exceeding 350,000 operations per second (“surpassing that of Uber or Netflix,” said Yusupov) and a data volume of nearly 100 petabytes.

    The Chestny ZNAK system isn’t specifically for tobacco products, though it has been successful in curbing the illicit tobacco market. The system can be used across goods, and it has been implemented in 16 categories of goods, including dairy products, water, clothing, footwear, perfumes, tobacco, medicines, beer and low-alcohol beverages, biologically active additives, antiseptics, medical products, soft drinks and juices, wheelchairs and children’s water, according to the CRPT. When asked about how the system works across goods, Yusupov stated that “The implementation process kicks off with pilot tests for each product category. While participation is not mandatory, it is in the business’ interest as it provides an opportunity to prepare equipment and practice with free Data Matrix codes. Workgroups are formed, comprising representatives from both the business sector and the system operator. Collaboratively, they develop a labeling concept that aligns with the unique requirements of each area within the circulation of goods.”

    And the system has been quite successful, according to its manufacturer. “Before the introduction of labeling,” said Yusupov, “the illegal tobacco market in Russia consistently grew, surpassing 15.6 percent by 2019. Following the implementation of labeling, it decreased by a quarter, with 18 productions legalized and 45 illegal ones shut down. Authorities claim that the combined impact of cracking down on illegal trade resulted in RUB245 billion ($2.7 billion) in increased tax revenues.”

    By the end of 2025, it’s estimated that the overall economic impact will reach RUB1.6 trillion ($17.6 billion).

    In addition to the Chestny ZNAK system, Russia has also enacted a law to systematize control over the circulation of tobacco raw materials and equipment through the licensing institute along with the establishment of an authorized government body for supervision. This government body has instituted a system for registration of equipment. Requirements have also been introduced for tracking the volume of production and circulation of tobacco products and raw materials and for the seizure and destruction of illegal tobacco products and the associated manufacturing equipment, and customs and border authorities have been granted additional powers in regard to illicit trade. Administrative and criminal liability are enforced for a broad range of violations related to mandatory product labeling requirements, including smuggling, production, introduction into circulation and transportation of unmarked goods. There are also quantitative restrictions on the movement of individuals within the territory of the Russian Federation with unmarked tobacco and nicotine-containing products. All of these reforms in combination with the Chestny ZNAK system have led to Russia’s success in curbing illicit trade, according to the CRPT.

    Marissa Dean joined Tobacco Reporter in the summer of 2018 as a copy editor.Since that time, she has taken on additional responsibilities, including feature writing.Her skills span the publishing industry from layout and design to copy editing to content creation.
  • PTC Disputes Tax Underpayment Charge

    PTC Disputes Tax Underpayment Charge

    Image: alexlmx

    Pakistan Tobacco Co. (PTC) is disputing allegations that legitimate tobacco companies are shortchanging the country’s tax collector, reports the Associated Press of Pakistan.

    Earlier this year, an Islamabad-based think tank presented figures showing that Pakistan’s national exchequer collected PKR567 billion ($20.4 billion) less from the tobacco industry than it was entitled to.

    “It is important to note that this figure is incorrect, misleading and detached from ground realities,” PTC wrote in a press release. “The only loss incurred to the government of Pakistan by the tobacco industry is because of tax evasion of illicit manufacturers as the legitimate industry pays all applicable duties and taxes.”

    Contrary to the report’s suggestion, the legitimate tobacco industry has significantly contributed to the national exchequer, paying PKR148 billion in fiscal year 2021-2022 and PKR173 billion in 2022-2023, according to PTC.

    The company highlighted that the government recently recognized PTC as one of Pakistan’s top tax-paying entities. It emphasized importance of a level playing field for the legitimate sector, which is currently undermined by the illicit sector.

  • Ukraine: Activists Decry PMI’s tax privileges

    Ukraine: Activists Decry PMI’s tax privileges

    Photo: Tania

    Activists are urging the Ukrainian government to crack down on international companies still operating in Russia following reports on Philip Morris International’s preferential tax treatment, according to Eureporter.

    Despite being labeled as an “international sponsor of the war,” PMI continues to enjoy a discounted tax rate in Ukraine.  

    After Russia invaded Ukraine in February 2022, many international tobacco companies, including PMI, announced they would retreat from Russia or substantially scale down their operations. In early 2023, however, PMI CEO Jacek Olczak told the Financial Times that negotiations had stalled as the company does not want to sell the business on unfavorable terms for its shareholders.

    Since the start of the war, Russia has made it exceedingly difficult for foreign investors to exit the market without taking a significant financial hit. Among other provisions, the government reserves the right to dictate the valuation of foreign companies’ Russian assets as well as the new owners’ dividend and access to cash flow.

    PMI’s revenue in Russia increased to RUR399.9 billion ($4.33 billion) in 2023 from RUR359.53 billion in 2021, the last fiscal year before the war. The company is among the five largest foreign taxpayers in Russia.

    PMI’s continued presence in Russia prompted Ukraine to designate the company as a war sponsor.

    Despite such considerations, Ukraine levies an ad valorem tax rate of only 12 percent on PMI products—a level that critics say has caused its cash-strapped government to miss out on some UAH100 billion ($2.55 billion) in tax revenues over the decade that the discount has been in place.

    Activists have called on Ukraine to introduce restrictions on tobacco companies that have not left Russia and increase the ad valorem tax rate for the products that these companies sell in Ukraine. They cite the example of Estonia, which in March prohibited the trade of products from international companies still operating in Russia.

  • Luxembourg to Tax Vapes and Pouches

    Luxembourg to Tax Vapes and Pouches

    Photo: Trevor Parker Photo

    Luxembourg will start taxing e-cigarettes and nicotine pouches in October, reports RTL Today.

    Slated to take effect Oct. 1, the measures are part of a Grand Ducal regulation currently in the process of being drafted. Under this provision, e-liquids will be taxed at €120 ($129.82) per liter while nicotine pouches will incur a tax of €22 per kilo.

    Minister of Health Martine Deprez and Minister of Finance Gilles Roth disclosed this information in response to an inquiry by Member of Parliament Sven Clement of the Pirate Party.

    Luxembourg also plans to start targeting next-generation products through its anti-smoking program. Lawmakers are also mulling price increases for tobacco products, which remain considerably less expensive in Luxembourg than in neighboring countries.

  • Analysts: UK Vape Tax Good for Tobacco Stock

    Analysts: UK Vape Tax Good for Tobacco Stock

    Image: James Thew

    Citi analysts have identified the U.K. government’s new excise tax on vaping products as an encouraging development for BAT and Imperial Brands, reports Proactive.

    Chancellor Jeremy Hunt confirmed in his Spring Budget speech that vaping products would be subject to a new tax from October 2026. According to media reports, this move is designed to maintain a financial incentive for choosing vaping over smoking, complemented by a concurrent increase in tobacco duty.

    The taxation framework will be based on nicotine content, with a three-tiered system imposing charges ranging from £1 ($1.28) per 10 mL to £3 per 10 mL in addition to the current 20 percent VAT.

    This structured approach aims to regulate the vaping market further and aligns with the government’s health strategy by providing a less harmful alternative to traditional smoking.

    Citi’s short research note said: “Although [Wednesday’s] confirmation of the planned levy on vaping comes as little surprise, we believe that alongside the proposed ban on disposable vapes from April 25, the regulatory risk/reward is skewing to the upside for both BAT and Imperial.”

  • U.K. Poised to Announce Vaping Levy

    U.K. Poised to Announce Vaping Levy

    Photo: spectrumblue

    U.K. Chancellor Jeremy Hunt is expected to announce a “vaping products levy” during the presentation of the government budget on March 6, reports The Guardian.

    The tax would be similar to 15 schemes in European countries, including Germany, where a €1.60 ($1.73) tax is charged on every 10 mL of vape liquid, and Italy where the rate is €1.30. The EU is also planning a vaping levy across the 27-nation bloc.

    The U.K. tax would charge higher rates for products with more nicotine. There would also be a one-off increase in tobacco duty to ensure that vaping remains a cheaper alternative, with the two measures expected to raise more than £500 million ($633.73 million) a year by 2028–2029, according to The Times.

    Prime Minister Rishi Sunak plans to ban smoking for the next generation by steadily increasing the legal smoking age in England so that tobacco would end up never being sold to anyone born on or after Jan. 1, 2009.

    Vaping industry representatives described the tax plan as an attack on people trying to quit smoking.

    “Vaping is proven to be the most effective way for smokers to quit and in doing so helps drastically reduce the cost of care the NHS [National Health Service] provides to smokers,” said John Dunne, director general of the U.K. Vaping Industry Association, in a statement.

    “It makes absolutely no sense to make it more difficult for adults to stop smoking by penalizing those who choose a safer and healthier option in vaping. Smoking kills 250 people every day in the U.K. and according to Action on Smoking and Health costs the U.K. £17 billion a year,” Dunne added.

    “A Centre for Economics and Business Research report in 2022 found that smokers switching to vaping saved the NHS £322 million, a figure that was estimated to more than double if 50 percent of U.K. smokers made the switch to vapes.

    “Surely, we should be doing everything we can to help smokers escape a habit that kills so many. Increasing taxes on vaping will make vapes less accessible for the most disadvantaged in society who have the highest smoking rates and are most in need of an effective tool to quit.

    “The government continue to hide their heads in the sand while taking actions that will fuel a black market which is already in danger of being out of control. Restricting access to vapes will not only mean more smokers; it will also mean more illegal and unregulated vapes. We need the government to license vape retailers and properly enforce the law against youth access before it is too late.”

    It makes absolutely no sense to make it more difficult for adults to stop smoking by penalizing those who choose a safer and healthier option in vaping.

    John Dunne, director general, UKVIA

    “A Centre for Economics and Business Research report in 2022 found that smokers switching to vaping saved the NHS £322 million, a figure that was estimated to more than double if 50 percent of U.K. smokers made the switch to vapes.”

    “Surely, we should be doing everything we can to help smokers escape a habit that kills so many. Increasing taxes on vaping will make vapes less accessible for the most disadvantaged in society who have the highest smoking rates and are most in need of an effective tool to quit.

    “The government continue to hide their heads in the sand, while taking actions that will fuel a black market which is already in danger of being out of control. Restricting access to vapes will not only mean more smokers; it will also mean more illegal and unregulated vapes. We need the government to license vape retailers and properly enforce the law against youth access before it is too late.”