Dan Kadison, SCMP
Several tobacco companies are feeling the burn from the government’s anti-smoking efforts, according to a member of an industry group.
Deanna Cheung, executive secretary of the Tobacco Association of Hong Kong, said some companies were estimating that sales of duty-paid cigarettes had dropped 20 to 40 per cent so far this year, in part because of February’s excise increase.
Those figures were “alarming”, she said, especially since the association believed the tax increase had done little to persuade Hongkongers to quit but had encouraged them to seek cheaper alternatives, such as purchasing duty-free cigarettes or buying smuggled or counterfeit packs.
“It doesn’t mean that people are consuming less,” Cheung said. “They can change to the illegal product, the cheaper product that’s defeating [the government’s] health objectives.”
In the first eight months of this year, duty had been paid on 1.96 billion cigarettes in Hong Kong, compared with 2.46 billion over the same time frame a year earlier, according to Cheung, citing data from the Customs and Excise Department.
The 20 per cent drop was in line with what Cheung’s employer, British American Tobacco, was experiencing, she said, although companies that handled smaller volumes were complaining of steeper declines.
The Tobacco Association – whose members include British American, Japan Tobacco, Pacific Cigar and smaller outfits – planned to schedule a meeting with government officials once it had “a detailed number on total consumption” and other research findings, Cheung said.
One alternative would be for the government to incrementally raise taxes when needed, rather than impose “a drastic tax increase”, which forced people to flee the duty-paid market, she added.
James Middleton, the chairman of Clear the Air’s anti-tobacco committee, said he was not surprised the number of cigarettes sold in Hong Kong was dwindling.
He credited the 50 per cent rise in the tobacco tax, which added HK$8 to a pack of cigarettes, with the decline.
The increase “has had a direct effect on duty-paid sales and that is shown through the figures”, Middleton said. “When taxation goes up, that’s the nemesis of the tobacco companies. That’s the worst thing that can happen to them.”
Middleton rejected the Tobacco Association’s claim that smokers were buying their cigarettes elsewhere, saying it was impossible for so many to be purchased from the duty-free or illicit markets.
There were restrictions on duty-free cigarettes, customs and excise officers were on the prowl looking for smuggled tobacco, and people were generally wary of buying counterfeit products, he said.
The Customs and Excise Department said it “has strengthened enforcement actions” as a result of the tax increase.
A Health Department spokesman said higher taxes turned people off smoking – not just in Hong Kong, but around the world.
“Cigarette pricing is well established as a key factor influencing tobacco consumption and smoking prevalence,” the spokesman said.
“According to the World Bank, on average a price rise of 10 per cent on a pack of cigarettes is expected to reduce demand by about 4 per cent in high-income countries and by about 8 per cent in low and middle-income countries, where lower incomes tend to make people more responsive to price changes.”
The spokesman said the effect of the tax increase “may be further reinforced by our extension of no-smoking areas, enhanced publicity and education, deterrent effects of the fixed-penalty system and so forth”.
He said there were 4,800 calls to the Health Department’s smoking cessation hotline within a month of the tax increase. That compared to 4,300 calls in the whole of last year.
