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Tobacco Tax

ACT Welcomes Tobacco Tax Hike In Federal Budget

The Alliance for the Control of Tobacco welcomes a hike in the federal tobacco tax announced this week by the Trudeau government.

http://vocm.com/news/act-welcomes-tobacco-tax-hike-in-federal-budget/

Executive Director Kevin Coady says they welcome anything to discourage smoking.

He says the surtax the tobacco manufacturer was paying has been removed, and the consumer tax increased, but it should discourage people from picking up the habit, or force them to cut back.

Statistics Canada earlier this week released numbers showing that this province has the highest rate of tobacco use in the country at 24.4 per cent, and marked increase from the previous survey.

Cigarette tax to rise 100 per cent

The tax on cigarettes is expected to be hiked 100 per cent this year as part of a selective tax agreement agreed last year by the Gulf Cooperation Council (GCC) to raise the price of goods deemed unhealthy, the Times of Oman said.

http://www.tobaccojournal.com/Cigarette_tax_to_rise_100_per_cent.54154.0.html

Cigarettes, alcohol and unspecified other unhealthy products have been targeted by the Finance Ministry for the tax increase this year, the Times said. The rationale for the stiff duties is that use of unhealthy products raises healthcare costs for governments, the newspaper said.

The 2016 selective tax agreement by GCC member states Bahrain, Kuwait, Saudia Arabia, Qatar, Oman and the United Arab Emirates calls for comparable duties on products deemed harmful to human health and the environment. For example a 100 per cent tax was approved for tobacco products and high energy drinks sold in member countries, while soft drinks face a 50 per cent tax.

Tobacco Control Program

Context

Tobacco use, and its negative health, social and economic impacts, is a significant global health challenge.

http://www.worldbank.org/en/topic/health/brief/tobacco

According to the 2015 World Health Organization (WHO) Report on the Global Tobacco Epidemic, in 2013, 21% of adults globally were current smokers – 950 million men and 177 million women. Despite increasing global population between 2007 and 2013, smoking prevalence has actually declined worldwide from 23% in 2007, preventing an increase in the number of smokers in the world. The total remains at 1.1 billion smokers globally in 2013.

Tobacco use is a leading global disease risk factor and underlying cause of ill health, preventable death, and disability. It is estimated to kill more than 5 million people each year across the globe. If current trends persist, tobacco will kill more than 8 million people worldwide each year by 2030, with 80% of these premature deaths taking place in the developing world.

In 2015, the “Addis Ababa Action Agenda” adopted at the Third International Conference on Financing for Development held in Addis Ababa, Ethiopia — and later endorsed by the United Nations as part of the Sustainable Development Goals (SDGs) — recognized that public policies and mobilization, and effective use of domestic resources, underscored by the principle of national ownership, are central to the common pursuit of sustainable development, including achieving the SDGs.

Clause 32 of the Addis Ababa Action Agenda states that price and tax measures on tobacco are viewed as an effective and important means to reduce tobacco consumption and health care costs, and represent a revenue stream for financing for development in many countries.

The Action Agenda also stresses that the tobacco tax agenda is fully consistent with obligations acquired by 180 countries that are parties to the WHO Framework Convention on Tobacco Control (FCTC) (an additional seven countries have signed the FCTC but have not ratified it, and only nine countries are neither signatories or parties to the FCTC).

World Bank Group Tobacco Control Program

The World Bank Group’s Tobacco Control Program assists selected countries in fostering and implementing tobacco tax reforms to achieve public health goals by reducing tobacco affordability and consumption, and controlling illicit trade on tobacco. Work is currently underway or being initiated in the Philippines, Indonesia, Senegal, Colombia, Botswana, Ethiopia, Armenia, Georgia, Liberia, and Lesotho; work in Ghana concluded. Initial discussions are taking place Ukraine, Nigeria, Moldova, China, India, Peru, and Tajikistan. In addition, the program aims to support knowledge exchange, including peer-to-peer advice and support, among selected countries on the economics of tobacco control (for example, through the Joint Learning Network, which includes more than 30 countries). The preparation of a Tobacco Taxation Module as part of WBG/IMF Tax Policy Assessment Framework (TPAF) is underway as part of a new WBG/IMF initiative launched ahead of the Financing for Development Conference in Addis Ababa, held in July 2015, to help member countries strengthen their tax systems. One of the pillars of the initiative includes the development of “improved diagnostic tools to help member countries evaluate and strengthen their tax policies.” Building on their collective expertise, the Bretton Woods Institutions (BWIs) aim to play a fuller role in enabling all of their member countries to assess tax policy performance in order to identify priority tax policy reforms, and design the requisite support for their implementation. The TPAF is a diagnostic framework to provide systematic and structured assessment of a country’s tax policy system, and to develop options for improving such system given a set of policy objectives.

More specifically, the program assists government agencies in developing capacity to assess the health and social costs of tobacco use, and design, enact, administer and monitor tobacco taxation policies. Enhanced capacity will enable countries to increase prices and reduce tobacco use, taking into account the macro-economic and fiscal situation of each country, tax laws, and existing tax administration structure and processes. This process includes assessments and discussions related to fiscal revenues and allocation; smoking patterns and taxes at country level; and socio-economic and health impacts of increasing tobacco tax rates, under different tax policy scenarios, and including impacts on employment, smuggling and other likely impacts of tobacco tax reforms.

The Bank team engaged in this program is multi-sectoral, and includes experts in health, governance, and macro-economics and financial management. Initial discussions are being held to mobilize knowledge and expertise from the International Monetary Fund’s Fiscal Affairs team. The Bank team is also working closely with other international partners, such as the World Health Organization and the Campaign for Tobacco-Free Kids.

The Bank’s Tobacco Control Program is implemented through a multi-donor trust fund financed by the Bill & Melinda Gates Foundation and the Bloomberg Philanthropies. These donors take part in governance of the trust fund and participate in the selection of priority countries included for support under the program.

Joint Learning Network Module: The Joint Learning Network (JLN), connects practitioners and policymakers across countries, facilitating peer-to-peer learning and sharing of knowledge and experience. As part of the Bank’s program, the network is currently developing a Tobacco Tax and Illicit Trade on Tobacco Module targeting member countries in Asia, Africa, Latin American and the Caribbean, and Europe, as well as a diverse group of international, regional, and local partners. The module is expected to focus on tobacco taxation, tax administration, and illicit trade control measures.

In 1991 the World Bank adopted a mandatory operational policy not to lend, invest in, or guarantee investments or loans for tobacco production, processing, or marketing. The Bank’s activities in the health sector discourage the use of tobacco products.

Why the emphasis on tobacco taxation?

Raising taxes on tobacco products is one of the most cost-effective measures to reduce consumption of products that increase mortality , while also generating substantial domestic revenue for health and other essential programs—investments that benefit the entire population. Given this, the World Bank Group Tobacco Control Program gives priority attention to tobacco taxation.

Findings in the 2015 WHO Report on the Global Tobacco Epidemic show that while only 33 countries impose taxes that constitute more than 75% of the retail price of a pack of cigarettes—the taxation level recommended to have an impact on consumption —most countries that do tax tobacco products have extremely low tax rates. And some countries do not have a special tax on tobacco products at all.

Given this situation, the World Bank Group’s program supports governments to look at accumulated country evidence and use tax measures to increase the retail price of tobacco products as one of the best available public health policy measures.

Some important lessons from international experience about how to effectively implement tobacco taxation policy to achieve public health objectives can be adopted and adapted in policy dialogue and operational support to countries. Such lessons include:

While nearly all countries tax tobacco products, an excise tax is the most important type of tobacco tax, since it applies uniquely to tobacco products and raises prices relative to prices for other goods and services.

Simpler tobacco tax structures are more effective than complex ones, since tiered tax structures are difficult to administer and can undermine the health and revenue impacts of tobacco excise taxes.

Use of specific excise taxes enhances the impact of tobacco taxation on public health by reducing price gaps between premium and lower-priced alternatives, which limits opportunities for users to switch to less-expensive brands in response to tax increases. Taxing all tobacco products comparably reduces incentives for substitution.

Ad valorem taxes are difficult to implement and weaken tax policy impact. Since they are levied as a percentage of price, companies have greater opportunities to avoid higher taxes and preserve or grow the size of their market by manufacturing and selling lower-priced brands. This also makes government tax revenues more dependent on industry pricing strategies and increases the uncertainty of the tobacco tax revenue stream.

Specific excise taxes need to be adjusted for inflation to remain effective.

Tax increases should reduce the affordability of tobacco products. In many countries, where incomes and purchasing power are growing rapidly, large price increases are required to offset growth in real incomes.

Strong tax administration is critical to minimize tax avoidance and tax evasion, to ensure that tobacco tax increases lead to higher tobacco product prices and tax revenues, as well as reductions in tobacco use and its negative health consequences.

Regional agreements on tobacco taxation can be effective in reducing cross-border tax and price differentials and in minimizing opportunities for individual tax avoidance and larger scale illicit trade.

For more information, please contact:

Patricio V. Marquez

Lead Public Health Specialist

World Bank Group Health, Population and Nutrition Global Practice

Email address: pmarquez@worldbank.org

Blanca Moreno-Dodson

Lead Economist

World Bank Group Macro Economics and Fiscal Management Global Practice

bmorenododson@worldbank.org

Recent Gains on Global Tobacco Taxation

http://blogs.worldbank.org/health/recent-gains-global-tobacco-taxation

The landmark Surgeon General’s Report on Smoking and Health, issued by U.S. Surgeon General Dr. Luther Terry in 1964, represented the first time that a government report linked smoking and ill health, including lung cancer and heart disease. The scientific evidence accumulated over the past five decades has helped us understand how tobacco use imposes a heavy health and economic burden across countries.

Action to curb tobacco use makes solid economic sense, given the high costs of tobacco-related illnesses and premature death and disability among adults in their most productive years. Smoking harms health, incomes, earning potential, and labor productivity. Smoking also undermines human capital development —a critical factor for inclusive economic and social development.

Raising tobacco taxation commensurate with affordability levels is proven to be the most effective measure to curve consumption. Tax increases are most effective in countries where the social acceptability of smoking is reduced by curtailing smoking in public places and educating the population about its negative health impact.

Contrary to the assumption that tobacco taxes are regressive, the results of recent studies done in Chile and the United States show that the benefits of this policy measured in terms of lower medical expenses and an increase in working years outweighs any relative increase in tobacco prices, largely benefitting the poor more than the rich.

Over the past decade, the World Bank Group (WBG), in partnership with the Bill & Melinda Gates Foundation and the Bloomberg Foundation, and in coordination other organizations, such as WHO, has expanded its tobacco taxation work globally to assist countries implement their public health and domestic resource mobilization efforts. Simultaneously, technical assistance is being provided to strengthen countries’ legal and regulatory capacity to control illicit tobacco trade. Support is also being provided to facilitate knowledge-sharing, building upon existing platforms such as the Joint Learning Network (JLN).

The experience of Philippines over 2012-2016 is one of the most compelling examples of ambitious national tobacco tax reform. It involved a fundamental restructuring of the country’s tobacco excise tax structure, including reduction in the number of tax tiers; indexation of tax rates to inflation; and substantial tax increases which expanded the fiscal space to fund the increase in the number of families enrolled in the health insurance scheme from 5.2 million primary members in 2012 to 15.3 million in 2015.

More recently, national governments in several countries have adopted significant tobacco tax reforms to improve public health and mobilize domestic resources, covering a total population of 200 million people. In the Ukraine, the 2017 budget includes a 40% excise tax increase on tobacco products, above the 2016 level, while maintaining a 12% ad valorem tax. It is estimated that that this measure will increase on average the excise tax burden as a share of the retail price of a pack of cigarettes from 41% in 2016 to 46% in 2017, while consumption is expected to decrease by 10%. To get a sense of the magnitude of health gains likely to result from the adoption of these tax increases, modeling work estimated that, by 2035, Ukraine’s recent tobacco tax increases will prevent 126,730 new cases of smoking-related disease; 29,172 premature deaths; and 267,098 potential years of life lost, relative to no change in tax. These reductions in disease and death are estimated to result in significant healthcare costs avoided.

As part of broad fiscal reforms approved by Colombia’s Congress, new taxes on tobacco products will nearly triple prices over 2017-2018, with annual adjustments for inflation and a mandated specific increase in subsequent years. Likewise, in Moldova, the average excise tax burden on a pack of cigarettes will increase from 39% in 2016 to 45% in 2017.

Following the introduction of the new tax regime in 2017, Armenia’s tobacco excise tax burden will double, increasing to 62% of the average retail price by 2020. In the case of Armenia and Colombia, tobacco taxation increases are part of larger tax system reforms that were included under fiscal consolidation programs.

In moving forward this agenda, we have to be clear that to be effective and sustainable, the design of tobacco tax reforms has to be grounded on a good understanding of how public policy is created and implemented in a country, including the social forces which could support or hinder the passage of strong anti-tobacco measures. We also have to be mindful that the adoption of tobacco tax reforms could be greatly facilitated if they are included as part of broad fiscal consolidation programs as shown by the recent experience in Armenia and Colombia, or as part of the formulation of annual government budgets as shown by the experience in Moldova and Ukraine.

Curbing teen smoking ‘must go beyond raising minimum age’

http://www.straitstimes.com/singapore/health/curbing-teen-smoking-must-go-beyond-raising-minimum-age

Teens below the age of 18 have been barred from smoking legally since 1993 – but the data two decades later tells a different story.

In 2013, the average age when smokers took their first puff was just 16, according to the National Health Surveillance Survey.

Said Mr Vincent Tng, 21, a non-smoker serving full-time national service: “I have friends who started smoking as young as 14 or 15 – they just got their friends to buy cigarettes for them. There are contraband cigarettes around, so you don’t even have to go to a proper shop.”

Experts said the discrepancy shows that efforts to curb teen smoking must go beyond raising the minimum legal age. Issues such as raising awareness and enforcement cannot be sidelined.

Said Sata CommHealth chief executive and anti-smoking advocate K. Thomas Abraham: “We should have a slew of measures that go concurrently with raising the minimum age. How are these young people able to get cigarettes? How do we plug the existing loopholes?”

Last week, the Ministry of Health (MOH) said it plans to raise the minimum legal smoking age from 18 to 21. In Singapore, these are the years when nearly half of smokers become regular smokers. The idea is to put cigarettes out of the reach of underage smokers, who tend to obtain them through their social circles.

A town in the United States known as Needham is often held up as a success story of how this measure can reduce smoking rates.

In 2005, it increased the legal smoking age from 18 to 21. Smoking rates among under-18s dropped by nearly half within five years – from 13 per cent in 2006 to 7 per cent in 2010. At least 215 other locales in the US have followed suit in recent years, including New York City, Boston and California.

Dr Chia Shi-Lu, who chairs the Government Parliamentary Committee for Health, said: “I don’t think that in itself will be enough… but raising the age would help interdict further access to cigarettes amongst the young.”

To complement the move, experts suggested increasing the size of graphic health warnings on cigarette packets, introducing plain packaging to make cigarettes look as nondescript as possible and even raising the tobacco tax.

According to the World Health Organisation, increasing tobacco prices in high-income countries by 10 per cent is estimated to reduce consumption by 4 per cent, said Professor Chia Kee Seng, dean of the Saw Swee Hock School of Public Health at the National University of Singapore.

Tobacco taxes were last raised in 2014, from $352 per kg to S$388 per kg of tobacco, or 1,000 cigarettes.(+import tax + GST) It was reported that out of the $12 (HKD66) for an average pack of cigarettes, $8.50 (HKD 47) goes to the Government as tax.

Prof Chia said tobacco taxes should be raised further if smoking remains a serious issue, even after the age limit is raised.

At the same time, said Dr Abraham, even more work needs to be done to drive home the anti-smoking message among young people, as “the long-term effects of smoking are not always immediately apparent to a young smoker”.

Nee Soon MP Louis Ng, who used to smoke, said enforcement needs to be stepped up to ensure cigarettes are not sold to underage teens, and more has to be done to change the image of smoking.

“They think it’s cool to smoke and we need to tackle that mindset with a series of public awareness campaigns,” he said.

Management executive Catherine Ruth Jeyaseelan, 34, suggested involving parents too. “Sometimes parents smoke at home and kids will get curious, they might try it when their parents are out.”

Commentary: Smoking is an archaic habit with no place in modern society

The move to raise the legal age for smoking gives a much needed boost to Singapore’s efforts at reducing the prevalence of smoking among youths.

http://www.channelnewsasia.com/news/singapore/commentary-smoking-is-an-archaic-habit-with-no-place-in-modern/3584938.html

Shocking as it sounds, many doctors used to smoke.

The groundbreaking study which first confirmed the link between smoking and lung cancer was carried out on British doctors in the early 1950s. UK Medical Research Council member Sir Richard Doll, who conducted the study chose doctors as his research participants because many of them smoked, and it would be easier to observe what happened to them as a result of smoking.

Within three years of observation, 37 died from lung cancer. All were smokers. The number of deaths rose to 70 after five years. His work provided strong evidence of the dangers of smoking and laid the groundwork for future public debates about smoking

Since then, governments around the world have put in place policies and programmes to stop people from picking up the habit and help smokers kick theirs. For instance, the United States introduced the tobacco advertising ban and tax in the 1960s.

Singapore became the first Asian country to ban tobacco advertising in 1971, followed by the banning of smoking in various public places. The Singapore Government has also dramatically increased the excise tax on tobacco since 1983.

The impact of such combination of measures was visibly evident. The proportion of smokers among male Singaporeans aged 18 and above declined from 42 per cent in the late 1970s to 24.3 per cent in 2010, and the per capita consumption of tobacco decreased from 2.36 kilograms to 0.77 kilograms in a short span of 30 years. The incidence of lung cancer also halved from around 60 per 100,000 in the 1980s to 30 per 100,000 today.

Nonetheless, the decline in the proportion of smokers has since hit a plateau over the last ten years, hovering around 23 to 24 per cent in males, and 3.5 to 4 per cent in females, and has not budged since. What this effectively means is that the number of new smokers now equal those who have died from or quit the habit. To lower the proportion of smokers, more aggressive efforts will be required to prevent Singaporeans from picking up the habit.

WILL RAISING THE MINIMUM LEGAL AGE REALLY HELP STEM THE HABIT OF SMOKING?

Senior Minister of State for Health, Dr Amy Khor, announced recently on Thursday that the legal age for smoking and buying tobacco products will be raised from 18 to 21.

This will be a much needed boost to Singapore’s efforts at reducing the prevalence of smoking among youths.

Raising the minimum legal age (MLA) makes it harder for them to get tobacco products either directly or through their social networks. More importantly, it contributes toward de-normalising smoking.

95 per cent of smokers in Singapore had their first puff before age 21. Increasing the legal smoking age to 21 reduces youth exposure to tobacco products during their adolescence – a critical stage of life where they are more susceptible to peer pressure, where their psycho-social maturity, including sensation seeking, impulsivity, and future perspective taking, are still not fully developed.

Detractors may question the rationale for raising the MLA.

Some critics argue that raising the legal smoking age is simply delaying initiation into the habit. But the fact is that those who do not pick up smoking by age 21 are unlikely to ever begin. There is evidence that the younger the adolescent is when he starts smoking, the higher the level of nicotine dependence, and the greater the probability of him becoming a long-term, heavy smoker.

Others may make invidious comparisons. After all, if an 18 to 20 year old can legally marry, drive, consume alcohol or serve national service, why is he not allowed to smoke?

Tobacco smoking is clearly very different from and far outweighs the aforementioned activities when it comes to fatalities. It is deliberately designed to be addictive and is known to cause disease and disabilities in both the smokers, as well as those breathing in secondhand smoke. There is no moderate level of consumption at which tobacco smoking is safe – for the smoker and those around him. It is a unique product that kills its user when used as instructed.

Another objection is that raising the MLA may lead to the emergence of a black market peddling tobacco products to underage smokers. To deal with that, law enforcement efforts can be intensified, and harsher penalties imposed on the sellers. For instance, New York City stepped up its enforcement and increased penalties for supply of illegal tobacco products when it raised the MLA.

Of course, even with these efforts, it is impossible to entirely curtail a black market. However, future generations of youths will be discouraged from smoking, disease will be averted and lives saved albeit with this negative “side effect”.

ADOPT AN APPROACH THAT IS SYMPATHETIC, EDUCATIONAL AND SUPPORTIVE

In meting out consequences for underage smokers, we ought to bear in mind that they too are victims of Big Tobacco advertising strategies directed at the aspirations of impressionable youth.

Our best defence would be to adopt an approach that is sympathetic, educational and supportive of their efforts to quit the habit. To successfully curb smoking initiation in our youths, we would do well to ensure adequate enforcement of the MLA on retailers who sell tobacco to minors.

The debate over the Government’s move to raise the minimum legal age is a reminder that no single silver bullet to reduce smoking prevalence exists. The MLA is only but one of the existing and additional future measures for effective tobacco control. Singapore has banned electronic cigarettes which tobacco companies intentionally market as “safer” to youths. They also claim that heated cigarettes are safer but studies have shown that they have the same nicotine content as traditional cigarettes.

There are other measures that we can consider in the fight against smoking. First, there is evidence that increasing the size of graphic health warnings (GHW) on the cigarette packaging prevents youth smoking initiation, boosts motivation to quit, reduces smoking among adults and sustains smoking cessation. Expanding the size of the GHW is a highly cost-effective control measure that we should consider implementing.

Second, several countries like Australia, France and UK have augmented their GHW with standardised packaging. Also known as “plain packaging”, this requirement removes all branding elements such as colour, image, trademarks, logos and text, and only allows the brand name to be printed in a standardised font, size and location on the pack. This reduces the appeal of the pack, weakens any branding power each product might have, and strengthens the impact of the GHW.

Australia was the first nation in the world to adopt plain packaging in 2012. Even though the health impact of the policy will take years to be fully seen, a post–implementation review published in February 2016 reported that the policy has reduced smoking and exposure to tobacco smoke, and is expected to continue doing so.

Third, price and taxes are effective tools for tobacco control. According to the World Health Organisation, a 10 per cent increase in tobacco prices will reduce consumption by about 4 per cent in high-income countries. We should raise tobacco taxes further as part of our suite of enhanced control measures, if we think that smoking remains a serious issue even after the MLA has been raised.

Last, internationally, there is a movement to go beyond conventional tobacco control strategies and adopt fundamentally different strategies that aim to eliminate smoking altogether. These are broadly classified as “Endgame Strategies”. Singapore should begin thinking about eliminating smoking completely. We would not be the first country to endorse and adopt this approach. New Zealand, Finland, Canada, Sweden and France have all endorsed the goal of achieving a smoke-free society in the next eight to 23 years.

Smoking was introduced commercially in the 1880s. It is an ancient and archaic habit, and has no place in our modern and progressive society.

Professor Chia Kee Seng is Dean of the Saw Swee Hock School of Public Health at the National University of Singapore.

Budget hits smokers as price of pack of 20 cigarettes increases 35p – putting average pack of 20 to £10.26

• Tobacco duty will increase at two per cent above inflation putting prices up
• Cost of 30g pack of rolling tobacco will also rise by 44 pence from 6pm tonight
• New ‘minimum duty’ means cigarettes can not be sold for less than £8.82
• Part of series of ‘sin taxes’ which will hike price of wine, spirits and beer

http://www.dailymail.co.uk/news/article-4294664/Smokers-hit-Budget-cigarette-price-rise-TONIGHT.html

Smokers have been hit by Philip Hammond’s spring Budget with the cost of a pack of 20 cigarettes rising by 35 pence tonight.

Tobacco duty will increase at two per cent above inflation under planned price hikes first announced in 2014.

The average cost of a 20-pack of premium cigarettes could now rise from £ 9.91 to £10.26, according to the Tobacco Manufacturers’ Association (TMA).

It also means the price of a 30g pack of rolling tobacco will increase by 44 pence from 6pm tonight.

A new ‘minimum duty’ is separately being introduced from the 20th May based on a packet price of £7.35 – meaning it will not be possible to buy a pack of cigarettes for less than £8.82.

Cigarette makers are furious about the rises with the TMA claiming it could force buyers to turn to the black market.

The organisation’s director general Giles Roca said: ‘We are disappointed that the Government has once again raised taxation on tobacco when tax on some of the lowest priced cigarettes already accounts for 90 per cent of the price.

‘Taxation on tobacco in the UK is already the highest in the EU meaning that prices in the UK are up to four times higher than in other European countries.

‘Taxation on tobacco has also increased by over 50 per cent over the last 5 years. Today’s move will simply encourage people to buy from the black market.

During his Spring Budget speech Philip Hammond, pictured above, announced a series of so-called ‘sin taxes’ which will see the price of wine, spirits and beer increase
‘It takes business away from the legitimate trade whilst costing the taxpayer around £2.4billion in lost taxes in the last year alone.’

It is part of a series of so-called ‘sin taxes’ which will also see the price of wine, spirits and beer increase.

Duty on alcohol had not risen for five years but in today’s Spring Budget speech the Chancellor announced plans that will hike the price of a bottle of still wine by 8p.

The duty on sparkling wine will increase by 10p with a litre of gin up by 43p and a litre of vodka rising by 40p, according to the Wine and Spirit Trade Association.

The Campaign for Real Ale (CAMRA) chairman Colin Valentine said: ‘UK beer drinkers, pubs and brewers have been let down by the Chancellor’s decision to increase beer duty for the first time in five years.

‘The announced two penny a pint increase marks a return to the days when the much-hated Beer Duty Escalator contributed to 75,000 job losses, 3,700 pub closures and a 24per cent fall in beer sales in pubs.

‘The rise in beer duty will ultimately hit consumers in their pockets and lead to pub closures across the country.’

The cigarette price hike is one of a series of ‘sin tax’ increases on wine, spirits and beer.

Tax us more, world’s biggest cigarette maker tells Philip Hammond – to persuade smokers to use e-cigarettes

http://www.telegraph.co.uk/news/2017/03/03/tax-us-worlds-biggest-cigarette-maker-tells-philip-hammond/

The world’s biggest tobacco company has for the first time asked to be taxed more by Chancellor Philip Hammond – to encourage smokers to switch to healthier alternatives.

Philip Morris, which makes brands such as Marlboro, said it backed an increase in taxes on its cigarettes as part of its bid to move to a “smoke-free future”.

In a Budget submission sent this week to Philip Hammond, the Chancellor, Philip Morris said “we support proportionate tax increases”.

Cancer is caused by burning the tobacco in cigarettes. Currently a packet of 20 Marlboro cigarettes costs £9.60, of which £7.10 is excise duty and VAT.

But a packet of 20 Iqos cigarettes – which heat, rather than burn the tobacco – cost £7 of which £2.94 is from excise duty and VAT. A packet of 20 Nicolite e-cigarettes cost £4.75 of which 79p is VAT.

The four page submission – a copy of which has been seen by the Telegraph – said: “Our priority is clear – to switch, as quickly as possible, hundreds of millions of adult smokers across the world to less harmful alternatives than continued smoking.

“While there is no substitute for quitting, we believe that harm reduction (ie promoting safer alternatives to those who would otherwise still smoke cigarettes) can bring significant public health benefits.”

Harm reduction was “an essential element of public health policy, and fully endorse regulatory and fiscal policies” which encourage consumers to switch from cigarettes.

Peter Nixon, UK managing director of Philip Morris, said: “We want to move towards a smoke-free future and a lot of that is incentivising people to move across from cigarettes to something that is less harmful.”

Mr Hammond is expected to confirm in Wednesday’s Budget that cigarettes will continue to be taxed at inflation plus 2 per cent.

Mr Nixon said he would not (want) taxes to be higher because that would act as an incentive for smokers to switch to illicit cigarettes that are smuggled into the UK.

Business groups, once tobaccofriendly, switch sides in fight

The local chamber of commerce is usually a reliable ally in battles against regulation. But when it comes to smoking rules, many business groups have decided they would rather switch than fight.

Even in states where tobacco has played an important role in the economy – including North Carolina, Kentucky and Missouri -chambers have endorsed cigarette tax hikes, raising the smoking age and other efforts to curb tobacco habits.

The shift has accelerated since 2016, driven by a growing awareness that smoking drives up healthcare costs for employers, business groups said.

Smoking restrictions often are part of broader wellness initiatives, such as promoting exercise and nutrition, aimed at improving health – and business.

“Smoking isn’t just killing us, it’s bankrupting us,” said Ashli Watts, a spokeswoman with the Chamber of Commerce for Kentucky, where one in four adults uses tobacco, the lung cancer rate is the nation’s highest and related healthcare and lost productivity costs nearly $5 billion a year.

“Companies do look at the health of a workforce,” Watts said. An unhealthy workforce “is a deterrent.”

In Kansas City, Missouri, the chamber joined the local Blue Cross and Blue Shield insurer in 2015 in launching a smoking cessation effort.

They hoped to persuade five communities to raise the legal tobacco age to 21 by 2018.

Within a month, two of the largest cities in the area had signed on, and now more than 20 communities with 1.4 million people have raised the age.

Pam Whiting, a spokeswoman for the Greater Kansas City Chamber of Commerce with members in Kansas and Missouri, said the group was “happily stunned” by the results.

“It is a real concern for our business members, for their employees and their bottom line,” she said.

In Indiana, where smoking costs an estimated $7 billion in healthcare and lost productivity, the state chamber is pushing for a $1-a-pack increase in the state cigarette tax, to raise the smoking age to 21 and for more spending on cessation.

“It’s not typical for a chamber to advocate for a tax increase,” said Kevin Brinegar, president and chief executive of the Indiana chamber. But, he added, the cost of smoking
“gives us a black eye.”

TOBACCO FIGHTS BACK

Cigarette makers are spending tens of millions to fight the efforts, according to a Reuters review of campaign spending data and interviews, healthcare groups and the
companies.

Brittany Adams, a spokeswoman for Camel cigarette maker Reynolds American Inc (RAI.N), said the local chambers’ efforts go against their core mission and could hurt businesses outside the tobacco industry.

“Chambers of commerce are supposed to protect the interests of businesses in their communities, and supporting these kinds of bills may negatively impact local wholesalers and retailers,” Adams said.

Last fall, the industry spent almost $100 million to fight cigarette tax ballot measures in several states. More than $70 million of that was spent in California, where voters approved Proposition 56, raising state taxes by $2 to $2.87 per pack.

Business groups in San Francisco and Los Angeles supported the measure. Tax increases failed in Colorado and North Dakota.

Although adult smoking rates in California are the second lowest in the country, its large population makes it the single biggest U.S. market with 8.5 percent of cigarette sales.

Marlboro cigarette maker Altria (MO.N) estimated tax hikes enacted in Pennsylvania and California would hurt industry sales volumes by about 1 percent this year.

Wall Street analysts say the bigger risk is that more states follow suit.

At least 215 states and municipalities – including Hawaii and California, as well as New York City, Chicago and Boston – have raised the age to 21, according to the Campaign for Tobacco-Free Kids.

A spokesman said Altria wants to see the battle return to Congress, where it believes it has gotten a better hearing. With the Tobacco Control Act of 2009, Congress set a national minimum smoking age of 18.

In 2015, an Institute of Medicine study concluded that raising the national minimum to 21 would prevent about 223,000 premature deaths among people born between 2000 and 2019.

A group of Democratic senators introduced a bill to raise the age nationally to 21, but it never got a vote.

“This is a complex issue, and Congress has established a thoughtful process to better understand it,” Altria spokesman David Sutton said.

Tobacco products already “are very heavily taxed,” Sutton said. He also said sales taxes were a particular burden on the poor and created incentives “for criminals to engage in contrabrand.”

The U.S. Chamber of Commerce has not taken a position on the bill in Congress to raise the smoking age, and, as a rule, it leaves local issues to local chambers, said chamber representative Blair Latoff Holmes.

In Kentucky, a recent survey found more than 90 percent of the state’s chamber members support bans on smoking in the workplace. But the chamber decided against pushing for a statewide ban because it believes the politics are stacked against it.

The industry has spent more than $3.7 million the last five years lobbying Kentucky state legislators, records show. And, in November, Republicans won control of the legislature with the support of many constituents who consider smoking a personal prerogative.

For now, the Kentucky chamber is putting its clout behind a doctor-sponsered bill that would ban tobacco products from schools. Currently, less than 40 percent of Kentucky school districts ban tobacco.

“Generation after generation of people in Kentucky have smoked,” said Watts, the chamber spokeswoman. “There are people who don’t know anyone who has ever quit.”

For graphic on rising taxes on tobacco products, click: bit.ly/2m0MMpr

(Reporting By Jilian Mincer; Editing by Michele Gershberg and Lisa Girion)

Philip Morris Facing More Thai Tax Evasion Charges

By Bryan Koenig https://www.law360.com/articles/891973/philip-morris-facing-more-thai-tax-evasion-charges

Law360, Washington (February 14, 2017, 6:38 PM EST) — Philip Morris International Inc. announced a widening Tuesday of the government of Thailand’s long-running criminal investigation seeking billions of dollars in potential penalties based on allegations the company deliberately shorted cigarette import prices to avoid full taxation.

The charges announced in Philip Morris’ annual report with the U.S. Securities and Exchange Commission were filed Jan. 26 and follow charges levied against the company a year earlier. While the January 2016 charges are seeking more than $2 billion in fines purportedly stemming from imports from the Philippines, the new charges cover cigarettes imported from Indonesia, Philip Morris said in the report.

“The government is seeking a fine of approximately THB 19.8 billion (approximately $562 million). The first hearing, which will focus on preliminary procedural matters, is scheduled for April 2017,” Philip Morris said in the filing. “PM Thailand disagrees with the allegations and believes that its declared import prices are in compliance with the Customs Valuation Agreement of the [World Trade Organization] and Thai law.”

According to the cigarette giant, the Thailand Department of Special Investigation, or DSI, probed Indonesian imports and the subsequent excise taxes and customs duties paid from 2000 through 2003. The late-January charges the public prosecutor filed in Bangkok Criminal Court also targeted a Thai ex-employee, Philip Morris said.

The company stands accused of working with the employee “with the intention to defraud the Thai government” on “under declared import prices of cigarettes” from 780 import entries between January 2002 and July 2003, all to avoid full taxation and duties, according to the filing.

The charges filed last year against Philip Morris (Thailand) Ltd. and seven current and former workers in the same court followed an investigation into the period from 2003 to 2007, according to the filing. Those charges cover allegedly “under declared import prices” from 272 entries brought in from the Philippines from July 2003 to June 2006, Philip Morris said.

“The government is seeking a fine of approximately THB 80.8 billion (approximately US$2.29 billion). The case is in the pre-trial evidentiary phase. Trials are scheduled to begin during the last quarter of 2017,” the company said.

“PM Thailand believes that its declared import prices are in compliance with the Customs Valuation Agreement of the World Trade Organization and Thai law and that the allegations of the public prosecutor are inconsistent with several decisions already taken by Thai Customs and other Thai governmental agencies.”

The Thailand charges are not the end of Philip Morris’ international tax woes.

Tuesday’s filing also discussed a South Korean Board of Audit and Inspection probe into whether inventory changes by cigarette companies like Philip Morris Korea Inc. complied with the country’s tax laws in the run up to a Jan. 1, 2015, cigarette tax increase. According to the filing, the audit wrapped up in November with the assessment of underpaid taxes and penalties. In order to avoid “nonpayment financial costs,” Philip Morris’ Korean affiliate paid the full amount of taxes assessed to the tune of about $185 million, according to the company.

Philip Morris also reported an early 2017 demand for around US$46 million total from other government authorities. The company vowed to appeal the assessments, while noting that the matter has been referred to the public prosecutor, who will investigate the potential for criminal charges against the company and others.

“If the public prosecutor decides to prosecute, it may seek up to three times the underpaid tax for company criminal penalties and up to five times the underpaid tax for individual criminal penalties,” the company said. “PM Korea believes that it has paid cigarette-related taxes in compliance with the South Korean tax laws.”

South Korea’s Ministry of Strategy and Finance has also filed criminal charges against the country’s Philip Morris unit and its managing director, according to the filing, which characterized the charges as allegations that it went over monthly product withdrawal restrictions imposed by the ministry. The public prosecutor will conduct an investigation into that complaint and make a decision about pursuing a case, according to Philip Morris, which noted disagreement with the allegations.