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Tobacco Tax

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.

ARE TOBACCO TAXES REALLY REGRESSIVE?

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Reducing Smoking Prevalence through Tobacco Taxation in Ukraine

Modeling the Long-Term Health and Cost Impacts of Reducing Smoking Prevalence through Tobacco Taxation in Ukraine

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Tobacco price rises cut smoking but some pay more than $40 a packet

The rapid rise of tobacco prices is seeing smokers change habits, say Nelson retailers.

However, there are diehard smokers, who say they cannot give up, paying more than NZ$40 for a packet of their preferred cigarettes.

At 10 per cent increase on cigarettes and tobacco products took effect this month, the first of four annual 10 per cent increases designed to help make New Zealand smokefree by 2025.

http://www.stuff.co.nz/nelson-mail/88756238/tobacco-price-rises-cut-smoking-but-some-pay-more-than-40-a-packet

ROBERT CHARLES/FAIRFAX MEDIA

Smoking just a little more harder to take in with tax hikes on January 1 raising the price of tobacco products by 10 per cent.

The cost of a packet of 20 cigarettes will rise to about $30 in the next four years.

Independent retailer Mark Nicholson of Richmond Discount said the excise tax increases had “not negatively” affected his business.

But he had seen a shift in where people bought their tobacco, and a change from premium to value brands.

“They’ll come to us because it’s a bit cheaper and a bit faster, as opposed to regulatory [procedures] at places like supermarkets,” he said.

While he accepted there was a goal to reduce smoking rates in New Zealand, especially among young people, Nicholson said there were unintended consequences from the price increases.

Some of his regular clients were getting “hammered” financially due to their life-long habit.

“The bulk of our customers are aged, on a pension or fixed income, have smoked their whole life and when they started smoking no one was saying, ‘hey its bad for you’,” he said.

A Nelson smoker of 48 years, who did not want to be named, said he now had to pay NZ$46 for his preferred packet of 40 cigarettes.

“It’s not going to restrict me because I’m craving for the damn thing – I’m addicted and there’s nothing they can come up with any certainty that will knock the cigarettes off,” he said.

He said he started smoking when it was a common part of Kiwi culture, when the health effects were not fully known and there were no warning labels on packets.

Nicholson said another unintended consequence of price rises was to make tobacco products very attractive to organised crime.

As a result, Nicholson said businesses like his spent thousands annually on insurance and security to protect against those looking to cash in.

“The costs just get exponentially higher for us, the risks get exponentially higher and we have to do things to combat that, because you’re talking about a product that’s highly targetable and highly fencible.”

Manager of Fresh Choice Nelson City Mark A’Court said sales for cigarettes and tobacco were down this year.

“This is an ongoing trend for our store over the past few years, where we are 7 per cent down, but not in all supermarkets where tobacco sales actually [show] growth in sales dollars, not volume.”

A’Court said Fresh Choice’s prices were set by its head office and they did not get into discount lines as some stores had done.

Packets of 20 were being sold for between NZ$23- $27, while 30 gram pouches of tobacco were selling between $48-$53.

New Zealand is already one of the most expensive places to buy cigarettes in the world, behind Australia which also has strong pricing measures to deter smokers.

Online database Numbeo shows that a packet of 20 Marlboro cigarettes costs, on average, NZ$22.

In comparison, the same quantity costs NZ$26.04 in Australia, $NZ15.57 in Britain, $NZ8.99 in the USA and $NZ0.93 in Nigeria.

Smokers have declined significantly in New Zealand in the last 20 years with 17 per cent of adults currently smoking, of which 15 per cent smoke daily.

This has dropped from 25 per cent in 1996/97.

The New Zealand youth smoking rate dropped from 14 per cent to 6 per cent in the past 5 years.

The three key objectives of tobacco control activities in New Zealand are to reduce smoking initiation, increase quitting and reduce exposure to second-hand smoke.

The national target is that 90 percent of Primary Health Organisation-enrolled patients who smoke have been offered help to quit smoking by a health practitioner in the last 15 months.

For the quarter between July and September 2016, Nelson Bays Primary Health sat third on the national table, with 92 per cent.

The cost of smoking: (Source: Quitline)

– Someone smoking a pack a day spends about $160 a week on cigarettes, which is nearly $8,500 each year.
– There are approximately 650,000 smokers in New Zealand.
– 4,700-5,000 New Zealanders die from smoking-related illness each year.
– Tobacco is the leading cause of preventable death in New Zealand.

Tripling tobacco taxes: Key for achieving the UN Sustainable Development Goals by 2030

Since the World Health Organization (WHO) adopted the Framework Convention on Tobacco Control (FCTC) a decade ago, over 180 countries have signed the treaty. Progress has been made in expanding the coverage of effective interventions–more than half of the world’s countries, with 40% of the world’s population have implemented at least one tobacco control measure, and despite increasing global population, smoking prevalence has decreased slightly worldwide from 23% of adults in 2007 to 21% of adults in 2013. How can greater reductions in smoking be achieved in the next decade and contribute to reaching the health and social targets of the UN Sustainable Development Goals (SDGs) by 2030? We review some key issues in the epidemiology and economics of global tobacco control.
Smokers face a three-fold higher risk of death versus otherwise similar non-smokers, resulting in a loss of at least one decade of life. While the hazards of smoking accumulate slowly, cessation is effective quickly. People who quit by age 40 get back nearly the full decade of life lost from continued smoking; quit by 50, get back six years; quit by 60, get back four years. Cessation is now common among adults in high-income countries. For example in Canada there are over 1 million more ex-smokers than just a decade ago. However, due in large part to the marketing and pricing strategies of the tobacco industry, cessation remains a major public health challenge in most low and middle-income countries (LMIC) where 85% of smokers live.

http://blogs.worldbank.org/health/role-excise-tax-meeting-sdg

Global annual cigarette sales rose from five trillion cigarettes in 1990 to about six trillion today. Cigarette production has increased by 30% in China since 2000, which consumes 40% of the world’s cigarettes. Global tobacco industry profits of about $50 billion – or $10,000 per tobacco death – enable it to access finance officials, fund pricing research, and run interference against tobacco control–summarised wonderfully by comedian John Oliver. Serious control of tobacco must counter these strategies on the basis of robust health, social and economic data that document the negative societal impact of tobacco use.

WHO has recommended a 30% reduction in smoking prevalence by 2025, which would avoid at least 200 million deaths by the end of the 21st century among current and future smokers. The only plausible way to reduce smoking to this extent would be to triple tobacco excise taxes in most LMICs. A tripling of the excise tax would roughly double the retail price and reduce tobacco consumption by about 40%. As of 2015, WHO reported that only 28 LMICs had comprehensive policies covering counter advertising, restrictions on public smoking, and on appropriately high taxes, and that few had made progress on raising taxes.

The common strategy of tobacco producers is to lobby governments to keep cigarettes affordable by keeping tax hikes below the rate of income growth, and by taxing different cigarettes at different rates to enable smokers to change to cheaper brands or lengths. Smart taxation needs to simplify taxes by adopting, ideally, a high, uniform excise tax on all types of cigarettes (both filter and nonfilter) to reduce downward substitution (let’s not forget, all cigarettes will kill you!). The Government of India has recently made modest tax reforms in this direction, the 2015 tobacco tax adjustment in China is reducing consumption and increasing fiscal revenue, and in 2016 World Bank teams supported the work of government teams in Armenia, Colombia, Moldova and Ukraine for the undertaking of comprehensive tax reforms that were approved by Parliaments, including reforms on tobacco tax structures and rate levels—additional work is being supported in other countries worldwide. Smart taxes can follow the example of Canada’s tax hike of about 5 cents a pack in 2014, as well as the Sin Tax Reform (both tobacco and alcohol) in the Philippines of 2012 that helped mobilize domestic resources to fund the expansion of universal health coverage. There have been other successes: Botswana, Ecuador, Mauritius, Mexico, and Uruguay, where local political champions, paired with expert taxation advice, achieved large tax hikes. South Africa also raised taxes in the last decade and has curbed consumption per adult by half.

Non-price interventions also play an important role as they help to reduce the social acceptability of tobacco use. Young American women took up smoking in large proportions in the 1960s and 1970s due in part to aggressive advertising (“The “Virginia Slims” epidemic”). Advertising bans or restrictions are likely one reason why young Chinese or Indian women have not yet done so. Australia has adopted plain packaging, and other countries are starting to follow this example. Simple questions on past smoking status to death certificates or to verbal autopsies could enable low-cost monitoring of the consequences of tobacco use in many populations.

Governments and international agencies with accumulated know how and expertise in data sciences such as the World Bank Group and OECD along with WHO could also help countries create accessible and independent sales, revenue and smuggling data sources as a basis for rational tobacco tax policy. Country finance officials should refuse advice from tobacco lobbyists to avoid falling into conflict of interest situations, as WHO recommends for health officials.

Implementing the FCTC more effectively in the next decade is required to raise cessation rates in LMICs. The World Bank recommended taxation as the core strategy in its 1999 publication, Curbing the Epidemic: Goverments and the Economics of Tobacco Control. Similar recommendations follow in recent reports on tobacco taxation by WHO, and by the International Monetary Fund. Building upon accumulated evidence and country experiences, a tripling of the worldwide excise tax might be the only way to achieve the 2030 UN Sustainable Development Goal of reducing non-communicable disease deaths by 30%!

Jamaica to evaluate WHO’s call for heavy taxation on tobacco industry

Health Minister, Dr Christopher Tufton says he along with stakeholders will be evaluating the call by the World Health Organisation (WHO) for heavy taxation on the tobacco industry.

http://jamaica-gleaner.com/article/news/20170124/jamaica-evaluate-whos-call-heavy-taxation-tobacco-industry

Addressing the WHO’s Executive Board in Geneva, Switzerland, yesterday Director-General, Dr Margaret Chan, said heavy taxation is one way of controlling tobacco use.

According to Tufton, Jamaica, which is a member of the WHO board, shares the concerns about the financial costs to treat tobacco-related illnesses and the associated cost to public health, globally and nationally.

He says any measure to discourage smoking and support public health is worth considering.

In a landmark report on the economics of tobacco and tobacco control, the WHO and the US National Cancer Institute concluded that smoking costs the global economy more than $1 trillion yearly.

The researchers also said smoking will soon kill more than six million people worldwide each year.

They show how tobacco control, through heavy taxation can save lives while generating revenues for health and development.

Hong Kong Department of Health Tobacco Control Zero Efforts

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