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Report | ‘One in three cigarettes illegal’ findings questioned by experts

http://macaudailytimes.com.mo/report-one-in-three-cigarettes-illegal-findings-questioned-by-experts.html

A report published last month, which found that one in three cigarettes in Macau SAR are illegal, has continued to come under scrutiny after experts and regional organizations questioned its creditability.

The report, entitled “Asia-16: Illicit Tobacco Indicator 2014”, was jointly commissioned by the International Tax and Investment Center (ITIC) and Oxford Economics (OE), and found that around 34.5 percent of all cigarettes consumed within Macau were illegal.

Last month, the Times reported on a press conference held by OE in Macau, outlining the main findings of the report. Since then, we have been alerted to recent critiques of versions of the reports from 2012 and 2013, including one which was published by Professor Hana Ross on May 20, 2015 titled “A Critique of the ITIC/OE Asia-14 Illicit Tobacco Indicator 2013”.

According to Ross, who is the Principal Research Officer of Economics of Cape Town’s University Tobacco Control Project, the 2012 and 2013 reports both fail to provide scientifically sound and unbiased information to policy-makers. She contends, “The figures and statistics [that they report] are the product of either incorrect or unverified/unverifiable estimation methods applied to often questionable data from multiple sources that do not blend.”

She added that “the results are not comparable across countries and are inconsistent with results of other studies.”

In her critique, Ross explains that the problems associated with the “Asia-16” report fall into four general categories: scientific method and data-gathering issues; a lack of detail allowing others to replicate the survey; the selective presentation of results; and what Ross terms “plain mistakes and errors.”

The main argument for tackling the illegal trafficking of cigarettes, according to the “Asia-16” report, is to prevent national governments from losing out on missed tax revenues. Some however, believe that the results may have been influenced by the interests of large tobacco organizations.

Oxford Economics was forthcoming at the time of the press conference in revealing that supporting data had been provided by both Nielson and the tobacco firm, Philip Morris International (PM). Indeed, the disclaimer at the beginning of the report reads that OE and ITIC “prepared the Report in accordance with specific terms of reference between Philip Morris International Management” and that “financial support was provided by PM.”

In the 2013 edition, the disclaimer read, “should any party choose to rely on the report, they do so at their own risk. ITIC and OE will not accept any responsibility or liability for the report.” Ross highlighted this in her criticism and reiterated that she “would caution any stakeholders against relying on this report when assessing the trade in illicit cigarettes in their country or in the region.” This may be considered one of the reasons why this part of the disclaimer was not included into the 2014 edition, “Asia-16”.

An additional critique, also authored by Ross, was published last month. It is a review of another report from ITIC, entitled “ASEAN Excise Tax Reform: A Resource Manual”. The October critique was commissioned by The Southeast Asia Tobacco Control Alliance (SEATCA), which according to their own descriptions, “supports ASEAN member states in developing and implementing effective, evidence-based tobacco control policies in line with the World Health Organization’s Framework Convention on Tobacco Control.”

Skeptics point out that the ITIC report “focuses only on tobacco taxation” whilst failing to mention the overall implications of tobacco products for public health or the overall economy. “Governments should be wary of the recommendations in this manual,” wrote Ross.

A media and communications representative from SEATCA told the Times: “We have not seen the Asia-16 report [2014 edition], however we have seen earlier editions and have commissioned a critique of Asia-14.”

When asked about the role of tobacco firm financing, the representative answered: “If Asia-16 is anything like those [previous] reports, we would not be surprised if it was funded by tobacco money.”

The report was based on a survey of 1000 packs allegedly discarded in Macau. Survey organizers collected the discarded packages and determined the origins of the cigarettes. According to Adrian Cooper, CEO of Oxford Economics, this is the most accurate method of ascertaining the proportion of illicit cigarettes in a given area as “people are not always forthcoming or honest” when they are asked about the origins of their cigarettes.

The main conclusions from the survey were that countries which impose higher taxes on cigarette sales and which are located within close proximity to cheaper locations “tend to see a higher rate of illicit consumption.” The results of the study pertaining to Macau look at data exclusively from 2014, and so did not reflect the recent regulations introduced in 2015, including a new tax hike and a reduced personal duty-free allowance.

Hong Kong Customs seizes cigarette smuggling worth 2.7 mln USD

http://www.shanghaidaily.com/article/article_xinhua.aspx?id=308054

HONG KONG, Nov. 4 (Xinhua) — Hong Kong Customs seized 7.7 million illicit cigarettes on Tuesday worth about 21 million HK dollars (about 2.7 million U.S. dollars), with a duty potential of about 15 million HK dollars, it said here on Wednesday.

The cigarettes were found in a container at the Kwai Chung Customhouse Cargo Examination Compound declared to be carrying housewares from Haiphong, Vietnam.

A spokesman said the operation showed the effectiveness of Hong Kong Customs’ enforcement strategy, especially the escalated enforcement actions against smuggling activities at source.

Under the Import and Export Ordinance, smuggling is a serious offence. The maximum penalty is a fine of 2 million HK dollars and imprisonment for seven years.

Hong Kong Customs detects suspected case of cigarette smuggling by ocean-going vessel

Hong Kong (HKSAR) – Hong Kong Customs smashed a suspected smuggling case involving illicit cigarettes yesterday (November 3) at Kwai Chung Customhouse Cargo Examination Compound. About 7.7 million sticks of suspected illicit cigarettes were seized. The market value of the cigarettes was about $21 million with a duty potential of about $15 million.

Through risk assessment, Customs officers inspected a 40-foot container, declared to contain houseware, arriving in Hong Kong from Haiphong, Vietnam.

During the inspection, Customs officers discovered about 7.7 million sticks of suspected illicit cigarettes, with a market value of about $21 million and duty potential of about $15 million. The unmanifested illicit cigarettes were seized for further investigation.

A Customs spokesman said, “The operation showed the effectiveness of our enforcement strategy, especially the escalated enforcement actions against smuggling activities at source. Customs will continue to carry out stringent enforcement action against all illicit cigarette activities.”

Under the Import and Export Ordinance, smuggling is a serious offence.

The maximum penalty is a fine of $2 million and imprisonment for seven years.

Members of the public are urged to report suspected illicit cigarette activities by calling the Customs 24-hour hotline 2545 6182.

Source: HKSAR Government

http://7thspace.com/headlines/519758/hong_kong_customs_detects_suspected_case_of_cigarette_smuggling_by_ocean_going_vessel.html

Reply to Does smuggling negate the impact of a tobacco tax increase?

http://tobaccocontrol.bmj.com/letters

James Middleton, NGO

Clear the Air

Re: Does smuggling negate the impact of a tobacco tax increase?. Tsui tobaccocontrol-2015-052310doi:10.1136/tobaccocontrol-2015-052310

NOT PEER REVIEWED

This article is manifestly wrong in material content.

Hong Kong has in fact, two current large domestic manufacturers of tobacco products, Hong Kong Tobacco Co Ltd and Nanyang Brothers Tobacco Co Ltd.

Moreover the HK Customs Dept are all over the local dial-up-delivery smuggling syndicates to the extent that the tobacco funded front groups ITIC and Oxford Economics had to produce wildly false and flawed Information on the supposed level of illicit product availability (suitably decimated by the following reports).

The HK Government gauges smoking prevalence from its Thematic Household survey reports; what is lacking in Hong Kong is the absence of questions in these Thematic Household Surveys seeking information on how many interviewees had purchased and / or used illicit tobacco in the previous year, the price they paid for it and the frequency of such DNP usage and whether they were concerned that the ingredients / nicotine/tar levels would most likely be far more toxic than the excise DP cancer sticks.

Only with the incorporation of this relevant data could the claimed 10.7% prevalence levels be accurately gauged.

In Singapore which has a lower cost of living than Hong Kong, a DP packet of Marlboro retails at HK$ 76 whereas the same DP packet in Hong Kong costs only HK$ 50, meaning tobacco remains affordable and available to HKG youth and there is no tobacco retailer license system, no POS display legislation and no onus on liquor /mahjong / sauna licensees to enforce the anti smoking legislation in their premises.

The Health Department Policy Bureau failed to seek an excise increase in the last Budget, according to the Financial Secretary in an RTHK radio interview in Feb 2015.

The Tobacco Control Office has just over 100 ‘enforcement’ officers to cover Hong Kong, Kowloon, the New Territories and the Islands area over two shifts meaning they have insufficient manpower to patrol.

http://seatca.org/dmdocuments/Asia%2014%20Critique_Final_20May2015.pdf
http://tobaccocontrol.bmj.com/content/early/2015/01/05/tobaccocontrol-2014-051937.full
http://www.legco.gov.hk/yr11-12/english/counmtg/hansard/cm0322-translate-e.pdf page 7400
http://www.customs.gov.hk/en/publication_press/press/index_current.html
Shows the multiple seizures and arrests.

Hong Kong Tobacco Company Ltd Address : 3/F Paramount Building, Hong Kong Tel 25618111 Owner Charles HO Tsu Kwok https://webb-site.com/dbpub/positions.asp?p=4462 http://www.bloomberg.com/research/stocks/people/person.asp?personId=8075652&ticker=1105:HK https://webb-site.com/articles/bauhiniafound.asp

Nanyang Brothers Tobacco Co Ltd http://www.nbt-hk.com/ Location: Tuen Mun Hong Kong http://www.zigsam.at/B_Peel.htm http://www.scmp.com/news/hong-kong/law-crime/article/1846318/tobacco-worker-43-dies-industrial-accident-hong-kong Nan Yang also manufacture flavored tobaccos (PEEL)which are sold in the local market http://english.caijing.com.cn/2004-03-20/110030213.html

Smuggling arrests http://www.siic.com/en_service_4.html

Nanyang owners Nanyang Brothers Tobacco Co., Ltd. Nanyang Brothers Tobacco (short for “NBT”)is the largest cigarette manufacturer in Hong Kong, of which main brand is “Double Happiness ” and has a history of more than 100 years. At present, “Double Happiness” has been one of the most valuable trademarks in the tobacco industry. The production base of NBT is located in Tuen Mun, Hong Kong. NBT owns advanced manufacturing techniques, and its process of production is completely under computer control and management in order to guarantee the quality of products. The product of NBT is not only sold to China Mainland, Taiwan, Hong Kong and Macao, but also sold to Singapore, Thailand and Korea and so on. In 2011, its sales revenue and net profit reached 2,473 million HK dollars and 610 million HK dollars respectively.

Cigarettes manufactured by Nanyang Brothers Tobacco Nanyang Brothers Tobacco Co. Ltd., located at Tuen Mun, New Territories, Hong Kong, China

Nanyang Brothers Tobacco Co. Ltd., located at 9 Tsing Yeung Circuit, Hong Kong, China Founded in 1906. NANYANG means SOUTH PACIFIC. Current PRODUCTS: Alain Delon, Centori, Chunghwa, DJ Mix, Just Above, Peel, Polar Bear, Shuang Xi, Texas 5, (The Globe), Wealth

Asia-16 Illicit Tobacco Indicator 2014

Download (PDF, 1.79MB)

Up in smoke: illicit cigarette trade cost Hong Kong government HK$2.5b in lost tax revenues last year, study reveals

Gloria Chan gloria.chan@scmp.com

One in every four cigarettes smoked in Hong Kong last year was illicit, costing the government HK$2.5 billion lost in tax revenues, according to study released on Wednesday.

The “Asia-16” study, conducted by UK-based Oxford Economics and funded by tobacco giant Philip Morris, shows 1.3 billion, or 28 per cent, of cigarettes consumed were illicit. Despite a 5.6 per cent point drop compared to 2013, Hong Kong ranks fourth in illicit cigarette trading out of 16 Asia-Pacific markets studied, behind Brunei, Macau, and Malaysia.

Adrian Cooper, chief executive officer of Oxford Economics, said the city had a “significant problem” with illicit cigarettes. “[It’s] driven in part by the substantial retail price gaps with neighbouring countries that were exacerbated by tax rises in 2009 and 2011,” he said, adding that the price difference created a huge incentive for cross-border trade of cigarettes.

According to the report, the price of the most-sold brand in Hong Kong last year was US$7.1 per pack of 20, significantly higher than US$1.1 in China, US$3.8 in Macau, and US$3.0 in Taiwan.

In 2014, excise taxes were raised by 11.7 per cent, which brought up the retail price of the most-sold brand by 10 per cent.

Concern groups called for stronger action against organised smuggling gangs and syndicates.

“Hong Kong’s serious illicit tobacco problem is dominated by cross-border organised crime groups that use the proceeds to finance other criminal activities,” said Jeff Herbert, adviser to the advocacy organisation Hong Kong United Against Illicit Trade (HKUAIT) and a former senior superintendent with the Hong Kong police force. “[The government] needs to get a lot tougher with such organised crime syndicates.”

Herbert suggested three main solutions: use the Organised and Serious Crimes Ordinance as an effective means to seek heavier penalties, freeze assets of organised criminals, and confiscate their crime proceeds; run more public education campaigns; and introduce a balanced excise policy with regular but moderate tax increases in pace with inflation.

Herbert also warned against excessive tax increases as he believed that would only push more smokers to consume illicit cigarettes.

The HKUAIT admitted being sponsored by tobacco companies but added that their group’s focus is not only on the cigarette trade.

Source URL: http://www.scmp.com/news/hong-kong/law-crime/article/1870706/smoke-illicit-cigarette-trade-cost-hong-kong-government

More than 1 in 4 cigarettes consumed in Hong Kong were illicit

Illicit tobacco remains a significant problem afflicting Hong Kong, with more than one in every four cigarettes consumed in 2014 being illicit. Illicit cigarettes cost the Government HK$2.5 billion in lost tax revenues.

The Asia-16: Illicit Tobacco Indicator 2014 (“Asia-16”) study, conducted by Oxford Economics, found that 28.0% of cigarettes consumed in Hong Kong in 2014 were illicit, a 5.6% point drop compared to 2013.

Intensified law enforcement efforts are believed to have led to a notable decline in Hong Kong’s illicit tobacco consumption, bringing it to the lowest level since the Illicit Trade Indicator first reported figures for 2012. However, illicit tobacco remains a serious problem in Hong Kong.

“Hong Kong still has significant problem with illicit cigarettes, driven in part by the substantial retail price gaps with neighboring countries that were exacerbated by tax hikes in 2009 and 2011”, said Adrian Cooper, Chief Executive Officer of Oxford Economics. “The consumption of illicit cigarettes has effectively wiped out tax revenues that could have covered more than two months’ rentals for 750,000 public housing tenants in Hong Kong.”

“Clearly, Hong Kong’s serious illicit tobacco problem is dominated by cross-border organized crime groups that use the proceeds to finance numerous other criminal activities”, said Jeff Herbert, former Senior Superintendent with the Hong Kong Police and Advisor of the Hong Kong United Against Illicit Trade (HKUAIT). “Hong Kong still needs to get a lot tougher with such organized crime syndicates.”

Mr. Herbert refers to the Organized and Serious Crimes Ordinance as an effective tool to seek heavier penalties, freeze the assets of organized criminals, and confiscate their crime proceeds.

In addition, Mr. Herbert believes that a robust public education campaign is also key to tackling Hong Kong’s illicit tobacco problem. “The recent anti-illicit trade TV campaign run by the Customs is a good start, and I look forward to seeing more in the coming months”, continued Mr. Herbert.

Mr. Herbert urges the Government to introduce a balanced excise policy with regular but moderate tax increases in pace with inflation, and cautions against excessive tax and regulations such as 85% health warning labels that may risk fueling the illicit trade and defeat the significant enforcement efforts.

“The elimination of illicit tobacco and of the smuggling groups and syndicates must take place first,” added Mr. Herbert.

http://www.stopit.hk/?page_id=505&lang=en

Supporting Organizations

Supporting organizations of the Hong Kong United Against Illicit Trade:

Mega Hospitality International (MHI)
Infinitum Technology Co., Ltd.
Millennium Wells Ltd.
Coalition of Hong Kong Newspaper and Magazine Merchants
Hong Kong Newspaper Hawker Association
Kampo Employment Agency
Coalition on Tobacco Affairs (CTA)
Philip Morris Asia Limited
The Office of Wong Tai Sin District Councillor Lai Wing-Ho
The Office of Legislative Councillor Paul Tse Wai-chun
The Office of Tsuen Wan District Councillor Kot Siu-Yuen
The Office of Tsuen Wan District Councillor Man Yu-Ming
The Office of Tsuen Wan District Councillor Timmy Chow
The Office of Eastern District Councillor Marcus Tse
The Office of Kwun Tong District Councillor Poon Chun-yuen
Tsuen Wan Kwai Ching District Women’s Association
Hong Kong Shippers’ Council
King Fu District Residents’ Advancement Association
Choi Wan Estate Residents’ Affairs Advancement Association
Keng Leng Neighborhood Association

Oxford Economics (OE) study on illicit tobacco trade

http://www.businessmirror.com.ph/unreliability-of-the-study/

Unreliability of the study

IF there’s anything to learn from the latest Oxford Economics (OE) study on illicit tobacco trade released recently in Hong Kong to a selective group of mediamen, it is its unreliability as a reference for taxation as it drew a sharp retort from no less than Internal Revenue Commissioner Kim S. Jacinto-Henares.

Henares branded as biased and inaccurate the study that the government lost last year more than P22 billion in revenues due to rampant consumption of untaxed cigarettes.

She cited a World Bank study which showed that only 5 percent, not 19 percent as claimed by OE, of the total cigarette consumption yearly was sourced from the illicit cigarette trade.

Henares said the study made by OE is biased, because it was commissioned by a big cigarette producer who strongly opposed the passage of the “sin” tax law.

Although the revenue chief did not elaborate to avoid being dragged into a trade war between the multinational company and its small competitor, Mighty Corp., which the former has been repeatedly suspecting of engaging in trade malpractices to increase its market share and profits.

What prompted Henares to react quickly was that this is not the first time that OE came out with such an unreliable study, especially at a time when revenue collections from the sin-tax law tremendously increased over the past few months and in the previous years, and, thus, debunked advocates of illicit trade.

There were three other highly questionable studies and reports on illicit trade that were also discredited not only by Henares but by the World Bank, World Health Organization (WHO) and the South East Asia Tobacco Control Alliance, equally reliable authorities on tobacco taxation and illicit trade.

One, is the AC Nielsen Report, which “estimates” illicit cigarettes using a questionable survey method. To date, nobody, except the multinational company, has seen an actual copy of the study. No government agency has been furnished with one, as well.

Two, is the Asia-11 Illicit Tobacco Indicator that you can throw away after reading the disclaimer that says:

“ITIC [International Tax and Investment Center] and OE prepared the report in accordance with specific terms of reference agreed between Philip Morris Asia Ltd., an affiliate of Philip Morris International Inc. [PMI] and ITIC. PMI has provided financial support for the report. However, ITIC and OE assume all responsibility for the report’s analysis, findings and conclusions.

“The report is to serve as a public policy resource pursuant to ITIC’s mission. Nevertheless, should any party choose to rely on the report, they do so at their own risk. ITIC and OE will not accept any responsibility or liability to any claim in respect of the report.”

Three, is the Senate Tax Study-Research Office report that was obviously twisted by the PR guys of the multinational firm to its favor. The report itself offers the recommendations that the data therein is inconclusive and subject to further analysis whether there are taxes and duties leakages.

The Southeast Asia Tobacco Control Alliance also found out that:

· The report failed to mention that, even according to its own results, the majority of countries (six out of 11) compared over time experienced a decline in the volume of illicit trade.
· Nowhere in the report is it mentioned that for the majority of countries (four out of seven) where the share of illicit consumption in total consumption of cigarettes increased between 2012 and 2013, there was no tax increase in 2013. Such result might have undermined the notion that tax increases drive increases in illicit trade, a key message of the report.
Finally, the report is full of errors and mistakes, which is rather surprising given the “commercial” quality and glossy graphical presentation of the results. For example, the report does not make any distinction between smoking incidence and smoking prevalence, even though these are two very different concepts: prevalence is the proportion of a population that smokes, while incidence measures how many people per year begin to smoke.

It also confuses “sales” and “consumption,” two fundamental concepts on which the calculations are based. In short, as was true for the prior Asia-11 Report, the reliance on potentially biased data, combined with the lack of transparency about methods employed, results in a study whose estimates are of questionable value. We would caution any stakeholders against relying on this report when assessing the trade in illicit cigarettes in their country or in the region.

Mighty’s rival should be reminded that it is violating not only laws made by Congress (Republic Act [RA] 9211 and its interagency committee, implementing regulations and RA 7394 on unfair competition and deception), memoranda between government agencies and Article 5.3 of the WHO-Framework Convention on Tobacco Control (WHO-FCTC).

The country is a signatory to this government noninterference convention in 2004.

In essence, the WHO-FCTC recognizes that tobacco industry interference poses the single greatest threat to tobacco control. It has been documented that the big ones (multinational) in the tobacco industry have used self-serving strategies to subvert, hinder and prevent tobacco-control efforts at the start of the illicit trade campaign.

To reach the writer, e-mail cecilio.arillo@gmail.com.

71 tonnes of illicit loose leaf tobacco worth $40 million seized

http://www.stockandland.com.au/story/3427152/71-tonnes-of-illicit-loose-leaf-tobacco-worth-40-million-seized/?cs=4770

Some of the 71 tonnes of illicit tobacco seized by Australian customs officials in June. Photo: Paul Bibby

Some of the 71 tonnes of illicit tobacco seized by Australian customs officials in June. Photo: Paul Bibby

It was, as one observer remarked wryly, “a lot of smokes” – 88 million in fact.

In the largest operation of its kind in Australian history, customs officers have intercepted 71 tonnes of loose leaf tobacco being smuggled into Australia from Indonesia.

The haul has a black market value of $40 million and would have cost Australia more than $27 million in lost tax revenue had it hit the streets.

The seizure was the result of an operation involving co-operation between Australian and Indonesian investigators that had led to 47 tonnes of the illicit product being seized in two containers in Sydney in June, the Minister for Immigration and Border Protection, Peter Dutton, said on Friday.

A third shipment of 24 tonnes was then seized by Indonesian authorities before it could be smuggled into Australia.

Seventy-one tonnes is the equivalent of 88 million cigarettes or 3.5 million packets.

“This tobacco would have cost Australia over $27 million in legitimate tax revenue if it had been successfully smuggled into the country and sold here,” Mr Dutton said.

“There are clear links to organised crime and we know that groups smuggling illicit tobacco into Australia are also involved in other illegal activities such as narcotics.”

He said a new strike force of 16 dedicated officers would be set up to target crime syndicates smuggling illicit tobacco into the country.

Hong Kong Customs seizes about 3.2 million sticks of suspected illicit cigarettes

http://7thspace.com/headlines/518296/hong_kong_customs_seizes_about_32_million_sticks_of_suspected_illicit_cigarettes.html

Hong Kong (HKSAR) – Hong Kong Customs detected a suspected smuggling case of illicit cigarettes yesterday (October 9) at Lok Ma Chau Control Point. About 3.2 million sticks of suspected illicit cigarettes were seized from an incoming lorry. The market value of the cigarettes was about $8.5 million with a duty potential of about $6 million.

Customs officers yesterday morning intercepted an incoming lorry declared to have 334 cartons of paper bags at Lok Ma Chau Control Point.

After thorough inspection, Customs officers found about 3.2 million sticks of suspected illicit cigarettes in another 244 carton boxes. The illicit cigarettes were mix-loaded with other goods and concealed in the rear part of the compartment. The 48-year-old male driver was arrested and the vehicle used for conveying the suspected illicit cigarettes was detained.

A Customs spokesman said, “The operation showed the effectiveness of the enforcement strategy, especially the escalated enforcement actions against smuggling activities at source.

Customs will continue to carry out stringent enforcement action against all illicit cigarette activities.”

Under the Import and Export Ordinance, smuggling is a serious offence. The maximum penalty is a fine of $2 million and imprisonment for seven years.

Members of the public are urged to report any suspected illicit cigarette activities to the Customs’ hotline at 2545 6182.