Category: Taxation

  • Philip Morris granted partial VAT refund

    Philip Morris granted partial VAT refund

    Photo: mehaniq41

    The Philippines Court of Tax Appeals (CTA) granted part of a refund claim by Philip Morris Philippines Manufacturing in the amount of PHP32.04 million ($564,407), which represents its unused input value-added tax (VAT) traced to zero-rated sales in 2015, reports Business World Online.

    The court ruling stated that Philip Morris was able to prove its entitlement to the amount by proving that sales invoices were actual shipments from the Philippines to foreign countries for export sales.

    “The court finds that even without the reopening of the trial at the division level, the submissions made by Philip Morris clarifying certain tabular presentations/summaries of its alleged zero-rated sales may already be reconsidered,” Associate Justice Catherine T. Mahan said in the ruling.

    Zero-rated sales are transactions made by VAT-registered taxpayers that do not translate to any output tax. Taxpayers must present official receipts that are attributable to a specific fiscal period, with the term “zero-rated” being written on them to qualify for a 0 percent rating.

    Philip Morris previously sought a refund of PHP90 million covering excess input VAT for 2015, which was partially granted by the CTA Third Division—the commissioner of internal revenue (CIR) was ordered to issue a refund of PHP31.18 million to Philip Morris.

    The CTA said the CIR failed to present new arguments that would call for a dismissal of the case while the CIR argued that the CTA should have rejected Philip Morris’ appeal since the export sales were not proven to be paid in acceptable foreign currency in line with the applicable rules. The CTA disagreed, stating Philip Morris has submitted acceptable bills showing that the shipments were paid for in acceptable foreign currency.

  • Morocco to Hike Duties on Disposables

    Morocco to Hike Duties on Disposables

    Photo: alexlmx

    Morocco will increase customs duties on e-cigarettes under the 2024 budget, reports Morocco World News.  

    The import duties would hike the levies on disposable electronic cigarettes from 2.5 percent to 40 percent. The goal of the increase is to apply the same import duty rate to disposable electronic cigarettes as that applied to other electronic cigarettes for the 2023 fiscal year, according to the Ministry of Economy and Finance.

    The 2024 draft budget also proposes an increase in import duty from 2.5 percent to 30 percent for certain consumer products and equipment. This increase would “strengthen the protection of local production of these products and equipment and promote the establishment of production units in Morocco.”

  • Pakistan Trace System Rolled Out by Year’s End

    Pakistan Trace System Rolled Out by Year’s End

    Image: Tobacco Reporter archive

    Pakistan’s track-and-trace system is expected to be fully installed throughout the tobacco industry by the end of December 2023.

    Two multinationals and one local tobacco company have already installed the Federal Board of Revenue’s (FBR) new automated system while six local companies have installed manual track-and-trace systems.

    Some local companies have raised concerns about the cost of the systems, prompting The Business Recorder to urge the government to offer discounts or installment payments on the equipment.

    According to the FBR, revenue from the tobacco sector has increased following the implementation of the system, with a major increase in the rates of the federal excise duty on cigarettes.

  • Major Tax Increase Introduced in Congress

    Major Tax Increase Introduced in Congress

    Credit: Roman R

    Last week, lawmakers in the U.S. introduced the CARE For Moms Act in Congress. That bill would increase healthcare for expecting and new mothers, while also exponentially increasing the taxes for vaping, roll-your-own, cigars and other tobacco products.

    The tobacco tax language in the CARE Act was copied and pasted out of the Tobacco Tax Equity Act, a bill that has been introduced as a rider in bills introduced in previous sessions of Congress but it failed to gain any traction, according to halfwheel.

    That could change after Sen. Ron Wyden and Sen. Dick Durbin have now introduced the Tobacco Tax Equity Act of 2023 in the Senate as a standalone bill, while Rep. Raja Krishnamoorthi introduced the bill in the House of Representatives.

    The tobacco tax-related language includes:

    • New taxes for e-cigarettes;
    • Doubling the tax on roll-your-own tobacco;
    • A more than 16x increase on pipe tobacco;
    • Doubling the tax on small cigars;
    • A massive tax hike for premium cigars;

    For premium cigars, the language removes the existing federal excise tax of 52.75 percent, capped at 40.26 cents per cigar, and replaces it with a weight-based tax of $49.56 per pound.

    Because it’s a weight-based tax, the difference between the existing tax and the new taxes would vary depending on how heavy the cigar is. For cigars robusto or larger, it would likely more than triple the current federal tax rate.

  • Healthcare Bill Could Raise Tobacco Taxes

    Healthcare Bill Could Raise Tobacco Taxes

    Image: JenkoAtaman

    The proposed U.S. Care for Moms Act would support the maternal health workforce, promote access to prenatal and postpartum care and provide resources to mothers as well as increase the excise tax on tobacco products, according to CSP.

    The National Association of Tobacco Outlets (NATO) outlined the tobacco-related proposals in the act: increasing tax on cigarettes from $1.01 to $2.02 per pack; implementing a new e-cigarette tax that would equalize the tax on cigarettes; increasing the tax on moist snuff from $0.11 per 1.2 oz tin to $2.02 per can; doubling the tax on small cigars from $50.33 to $100.66; implementing a new weight-based tax methodology on large cigars; doubling the tax on roll-your-own; and equalizing the tax on chewing tobacco and pipe tobacco to tax them like cigarettes.

    Similar tax legislation has failed in past congressional sessions, according to the NATO.

    The Care for Moms Act also includes provisions to establish a state-based perinatal quality collaborative grant program, establish regional centers of excellence to tackle implicit bias and promote cultural competence among health professionals, support federal efforts to grow and diversify the doula workforce and extend Medicaid coverage for postpartum mothers in all 50 states.

  • Russia Introduces Flexible Export Duties

    Russia Introduces Flexible Export Duties

    Image: selensergen

    Russia has introduced flexible export duties on tobacco products, alcohol products, live animals, fish, dairy products, vegetables, fruits and many other goods, reports Tass.

    The temporary measure is set at 4 percent to 7 percent at an exchange rate above RUB80 ($0.83) per dollar. At RUB80 per dollar and below, the duty will be zero.

    The measure is aimed at protecting the domestic market, and there are exceptions for some items.

  • FDA: Premium Cigars Exempt from User Fees

    FDA: Premium Cigars Exempt from User Fees

    Image: J A Nicoli

    The U.S. Food and Drug Administration will not assess user fees for premium cigars in the fourth quarter of fiscal year 2024, the agency told manufacturers and distributors, according to Halfwheel.

    The statement follows last month’s outcome of Cigar Association of America et al. v. United States Food and Drug Administration et al., which led to deeming regulations not being applied to cigars that meet the definition of “premium cigar.”

    User fees help fund the Center for Tobacco Products. The amount of user fees is set by Congress; companies that import or manufacture cigarettes, roll-your-own products, snuff, chewing tobacco, cigars or pipe tobacco are assessed fees, and individual shares are calculated based on excise taxes paid on each product compared to the total amount of excise taxes paid by all products.

    The FDA, however, does not know whether a cigar company is selling premium cigars, nonpremium cigars or a mixture of both. Due to this, the FDA is asking companies to submit dispute letters within 45 days of the assessment of user fees. The agency is allowing companies the option of either paying the full amount of user fees with the intent of getting refunded for user fees assessed to premium cigars or paying what the company believes it will owe for nonpremium cigars.

    The FDA has stated that it will introduce a better process going forward, but it has not released information regarding what that will look like.

    There was no mention as to whether the FDA plans to refund user fees paid for premium cigars from August 2016 to the second quarter of fiscal year 2023.

  • Indonesia: Tax Collections Fall Short

    Indonesia: Tax Collections Fall Short

    Photo: Taco Tuinstra

    Indonesia had collected only half of the targeted tobacco taxes by the end of August, reports Tempo, citing the country’s Directorate General of Customs and Excise.

    According to the directorate’s director of communication, Nirwala Dwi Heryanto, the state’s income from tobacco excise reached only IDR126.8 trillion ($14.76 billion) by the end of last month—far short of the IDR232.5 billion anticipated in the 2023 state budget.

    Based on the collections to date, Heryanto expected Indonesia’s tobacco tax collections to reach 93.98 percent of its target by the end of 2023.

    Heryanto attributed the shortfall to downtrading, a shift from combustible cigarettes to vapor products and illegal distribution of cigarettes.

    To reach its target, Customs and Excise is stepping up enforcement and improving its technology and information service, Heryanto said.  

  • Korea: Vape Firms Evading Taxes

    Korea: Vape Firms Evading Taxes

    Image: Andrii Yalanskyi

    E-cigarette companies have been evading taxes by declaring false nicotine content when importing liquid nicotine base into South Korea, according to one of the country’s lawmakers, reports The Pulse.

    The accumulated tax evasion is estimated at several trillion won.

    Between January 2020 and July 2023, 20,197 kg of liquid nicotine base was imported, according to documents from the Korea Electronic Liquid Association obtained by Lim Lee-ja of the ruling People Power Party. Approximately 3,300 bottles of e-liquid can be produced with 1 kg of liquid nicotine. Each bottle is levied at KRW53,970 ($40.60).

    Many e-cigarette companies have been mis-declaring tobacco leaf nicotine as tobacco stem and root nicotine to evade taxes since 2016, according to the association. Under Korea’s tobacco laws, nicotine extracted from tobacco stems and roots is not classified as tobacco.

    Data shows that e-cigarette companies changed their declarations from tobacco leaf nicotine to synthetic nicotine when Korea’s Individual Consumption Tax Act was amended in 2021 to impose taxes on all tobacco-derived nicotine. Synthetic nicotine is classified as a simple commodity and not subject to taxes.

    The association stated that annual distribution volume of Korean e-cigarette liquid is 30 million 30 mL bottles, with an estimated annual tax evasion of KRW1.6 trillion.

    In 2019, the Board of Audit and Inspection audited the Korea Customs Service, the Ministry of Environment and the Ministry of Health and Welfare, showing that all the inspected imported nicotine was tobacco leaf nicotine. Falsified declarations have continued since then, according to the association.

    Lim has called on the government to crack down on companies falsely declaring their products.

    Liquid nicotine base is considered a hazardous substance under the Chemical Substance Control Act, regulated by the Ministry of Environment. Imports must be reported to the minister of environment, and companies must obtain an import declaration certificate for hazardous substances.

    Those caught failing to report or falsely reporting the import of hazardous substances are subject to up to one year of imprisonment and up to KRW30 million in fines. None of the companies shown to have falsely declared nicotine products in past audits have been punished to date.

  • Sweden to Slash Snus Tax

    Sweden to Slash Snus Tax

    Photo: Tobacco Reporter archive

    The Swedish government intends to reduce the tax on snus by 20 percent and increase the tax on combustible tobacco products by 9 percent.

    In a note on its website, the government said the move would lower the price of a snus can by approximately SEK3 and reduce the price of a cigarette pack by about SEK4.

    Parliament had previously decided to increase tobacco taxes in 2023 and 2024. However, recent inflation has been higher than the forecasts upon which the increases were based.

    Sweden already taxes smokeless tobacco at lower rates than smoked tobacco because it believes combustible products present a greater health risk.

    The changes are expected to take effect on Nov. 1, 2024.

    Tobacco harm reduction advocates applauded the decision. “Sweden’s new taxation policy is an exemplary move in fast-tracking the country even further towards its smoke-free target,” said Michael Landl, director of the World Vapers’ Alliance, in a statement.

    “By making less harmful alternatives like snus more accessible through tax reductions, Sweden is not just theorizing harm reduction; it’s effectively implementing it. It’s time for the EU to take a leaf out of Sweden’s book.”