Tobacco: Al the Facts, Legislation, and How it Affects Your Health.
Illegal cigarette industry becomes largest tax evader in Pakistan
Tuesday, 27 November 2012
ISLAMABAD: The illegal cigarette industry in Pakistan has grown to become
one of the largest tax evaders in the country, causing great loss to the
national economy.
The local industry has suggested the Federal Board of Revenue (FBR) to
change its modus operandi related and introduce reward mechanism for the
officers who seize counterfeit cigarettes.
Download PDF : v013pii104
http://www.malaya.com.ph/index.php/160-news-flash/18483-bat-in-smuggling-researchers-claim
“The authors of the study said ‘ the industry documents have primarily provided evidence of complicity in smuggling by BAT.’”
“Cigarette smuggling, comprising around one quarter of exports undermines public health by making cheaper cigarettes more readily available and, in turn, encouraging increased consumption.”
This is the conclusion of a research “supported by the National Cancer Institute, US National Institute of Health”. The study covers Asia, Lebanon, China, Cambodia, Uzbekistan.
A research done by J. Collins, E. LeGresley, R. MacKensie, S. Lawrence and K. Lee entitled Complicity in Contraband: British American Tobacco and cigarette smuggling in Asia” concludes BAT documents demonstrate the strategic importance of smuggling across global, regional, national and local levels.
“Particularly important in Asia, contraband enabled access to closed markets, create pressure for market opening , and was highly profitable.”
The results of the research points out “documents demonstrates BAT’s detailed oversight of illicit trade, seeking to reconcile the conflicting demands of control and deniability.
The research admits that there are strong indications that other cigarette companies are similarly involved in illicit cigarette trade. However, the authors of the study said “the industry documents have primarily provided evidence of complicity in smuggling by BAT.”
The researchers noted “… the documents from BAT often seem more candid than those from its competitors.”
According to the researchers “this may be attributable to variations to corporate culture, a historically lower sense of vulnerability to litigation.” This is variously interpreted to mean that BAT may have mounted a huge and successful lobby that might have lulled BAT into the culture of feeling invulnerable or have a lower sense of it.
The researchers pointed out “many of the most dramatic disclosures of tobacco industry misconduct have been obtained from BAT documents including evidence of price fixing.”
What appears to be the preparedness of the Philippine government to give to BAT in the name of leveling the playing field the privilege of raising by higher than 700 per cent the tax on cigarettes for the poor fits squarely with the alleged involvement of the new player in illicit cigarette trade.
We have tirelessly explained the reality that when the price of cigarettes for the poor goes up beyond their means as a result of the proposed heavy tax burden, they switch to cheaper smuggled brands.
It is not exactly funny or strange that BAT has proposed a higher tax burden on the cigarettes for the poor although the brands it will export to the Philippines are premium, or cigarettes for the well-heeled.
The BAT cigarettes do not in any way compete with the poor man’s cigarette of the Filipino. How is the playing field leveled that way?
The record shows that demand for premium brands is a speck in the tobacco industry, less than two per cent in fact.
How does raising the price of low end cigarettes which do not at all compete with premium figure in the business interest of BAT in exporting cigarettes to the Philippines?
It hardly does. Low-end brands and premium have their own distinct identifiable markets. One does not cross the other. Therefore, British American Tobacco does not hope to compete with the low end brands of Philippine-made cigarettes which may succumb to smuggling after the proposed 700 per cent additional tax takes effect.
Therefore it has no interest in pushing for higher tax increase on cheap cigarettes. But it does so in the interest, it says, of leveling the playing field.
Given the fact that demand for premium brands hardly grows, why does British American Tobacco want to come back to the Philippines on condition that the playing field is leveled by making the price of the poor man’s cigarette beyond his reach?
A higher liability would not in any manner increase the demand for the premium brands of BAT. What is definite is the poor man’s cigarette will practically disappear after its demand is taken over by illicit cigarettes.
Again, how does BAT benefit from a situation such as this? It will not. But it can immensely if it joins the smugglers.
This is the whole purpose of the research study supported by the National Cancer Institute and the US National Institutes of Health. What the researchers found in the documents of BAT itself are far from flattering. On the contrary it is condemnable.
Now we ask, what gain will the country get passing the excise tax bill? We see none. What harm can happen? We see a lot. We surrender the tobacco industry to the smugglers. We may not collect the expected tax precisely because illicit goods do not pay a tax.
Smuggled or “blue seal” cigarettes will encourage more smoking on the youth because of cheaper prices.
***
email: amadomacasaet@yahoo.com
http://manilastandardtoday.com/2012/11/19/cigarette-smuggling-from-the-philippines/
Cigarette smuggling from the Philippines
By Alvin Capino | Posted on Nov. 19, 2012 at 12:01am | 961 views
For several years now, there has been a lucrative but low-profile cigarette smuggling operation based in the Philippines.
We don’t know if the operation is still ongoing but until a couple of years ago, the cigarette smuggling had been flourishing from the Poro Point port in La Union and in the SBMA port in Subic.
The cigarettes smuggled from these Philippine ports are destined for the People’s Republic of China where the country’s burgeoning middle class in a booming economy have developed a taste for imported cigarettes other than their popular locally manufactured “Chunghwa” and “Double Happiness” brands.
China is a lucrative cigarette market with an estimated 350 million smokers who smoke an estimated 1.7 trillion cigarettes a year.
The cigarette brands smuggled to China from the Philippines are the popular premium brands preferred by China’s smokers, principally State Express 555, Kool and Camel.
It is not known where these cigarettes shipped from the Philippines come from, whether they are brought in the country as transhipment or manufactured in clandestine factories in the country. What is certain is that these smuggling operations are known and condoned by Philippine government officials.
The smuggled cigarettes are brought to China via medium-sized fast patrol crafts powered by powerful engines. These fast crafts, we are told, can outrun any and all of China’s coastal patrol boats. The fast crafts make a couple of trips every week to China, filled to the brim with thousands of cartons of cigarettes.
It is interesting to mention these Philippine-based cigarette smuggling operations because soon we would see similar operations with the Philippines no longer an origin but a destination once the “sin tax” bill, imposing as much as a 1,000-percent increase in taxes, is implemented.
It is doubtful whether the “sin tax” would be able to curb smoking. What is sure is that there will be a huge boost for cigarette smuggling. Cigarette smuggling will certainly flourish because it will become lucrative.
If China with its tight security and efficient coastal border patrol is unable to curb the smuggling of cigarettes, then how can the Philippines control the expected deluge of cigarette smuggling with our porous borders and a virtually unguarded coastline?
Cigarette smuggling as a direct result of the imposition of unreasonable and burdensome taxes has been the experience of many countries and territories that have adopted this strategy.
Hong Kong is one example. The November 3 editorial of the Hong Kong Daily News entitled “The method of banning illicit cigarettes by levying heavy tobacco tax should be comprehensively reviewed” detailed Hong Kong’s experience when it imposed increased taxes on cigarettes.
The editorial explained: “Crimes related to illicit cigarettes have continued to increase despite the severe penalty. Crimes are even increasing at a skyrocketing pace, with the fastest growth recorded during the time from 2009 to 2010. Tobacco tax was levied 50% higher in that year, so the number of individuals buying illicit cigarettes rose sharply accordingly by 90%.”
It added: “Considering the fact that the current tax rate of each stick of cigarette is HK$1.7, one can see that great profit that lures a large group of people to take the risk of selling illicit cigarettes. Buying illicit cigarettes can save a large sum of money, which is an irresistible amount for those in the lower classes, especially chain smokers without any self-control.”
The editorial might as well be describing what the situation would be in the Philippines if and when the sin tax, as proposed in the Senate, is approved.
What happened in Hong Kong also happened in Canada where the imposition of heavy cigarette taxes have resulted only in increased cigarette smuggling. There has been no increase in income for the government and no decrease in smoking.
According to news reports, the Canada-based National Coalition against Contraband Tobacco has expressed concern that the highly lucrative smuggling of cigarettes “undermines the safety of our communities by fuelling organized crime.”
NCACT’s Gary Grant said Canada has lost about $2.1 billion in taxes annually because of smuggled cigarettes.
He said: “Such a loss of revenue is certainly a reason for government to be concerned. But as a public interest group, we are equally concerned at how contraband tobacco funds organized crime and contributes to youth smoking.”
The Royal Canadian Mounted Police, the counterpart of our Philippine National Police, has estimated that there are some 175 criminal gangs involved in cigarette smuggling. These gangs use the illicit money they raise to finance their other illegal activities, including guns, drugs and human smuggling.
Cigarette smuggling is probably as lucrative as jueteng. Perhaps even more. We see the country’s criminal syndicates anticipating the approval of the sin tax while singing “Happy days are here again”.
http://www.bangkokpost.com/business/economics/321508/no-smoke-without-ire
Tobacco retailers fear tough new regulations will impinge on people’s freedoms.
Forty-eight -year-old Wanchai Kusomboompol sells cigarettes at his mom-and-pop shop in Bangkok’s Sam Yan area mostly to casual workers who buy fewer than 10 cigarettes per day on average.
About 480,000 retailers fear new tobacco regulations will cause them a burden. ‘Sales will be definitely lower but there will be an increase in illegal cigarettes,’ says Mr Wanchai.
“Some people, especially those who earn less money, do not buy cigarettes in packs. Some smoke only three per day, and therefore it just makes more sense for them to buy separate ones,” he said.
All that will change next year, once new measures by the Ministry of Public Health are put in place. The measures will also prevent shops like Mr Wanchai’s from selling cigarettes near educational institutions.
Provisions will also open the door to plain packaging, removing all forms of branding _ trademarks, logos, colours and graphics _ except for the brand name written in a standardised font on the package.
Mr Wanchai is among the 480,000 registered retailers nationwide who say the ministry’s new tobacco regulations will cause them a burden.
“Sales will be definitely lower but there will be an increase in illegal cigarettes,” he said.
The Thai Tobacco Trade Association (TTTA), which has about 1,300 retailers, wholesalers and distributors across the country, has called on the ministry to abandon the plan.
“We are not against health concerns, but the law should not increase the burden on retailers as selling cigarettes is not against the law,” said TTTA executive director Varaporn Namatra.”The law should not limit people’s rights and freedoms.”
The provisions under the proposed Tobacco Consumption Control Act (TCCA) will require retailers to submit costly annual reports, restrict the age of sales persons, participate in anti-smoking campaigns and restrict the display of prices.
The TCCA will also prohibit major retailers from partnering government agencies to conduct charitable programmes, such as providing disaster relief support in response to flooding, Mrs Varaporn said.
“Moreover, the draft is too broad, ambiguous and gives the Public Health Ministry too much authority to issue further regulations without public consultation or review by parliament,” she said.
According to a new poll conducted by Ipsos Thailand on behalf of TTTA on 1,000 retailers, 78% of retailers believe the new regulations will negatively affect their businesses.
Instead of introducing new regulations, 72% believe more education and 50% believe better enforcement of current laws would be more effective in reducing smoking rates.
“At a time when retailers expect economic conditions to worsen next year, the government could be wrong to experiment with costly tobacco regulations that will hurt retailers but do very little _ if nothing at all _ to reduce smoking levels,” said Mrs Varaporn.
The government should instead focus on measures that are proven to reduce smoking levels, such as better education and existing laws of enforcement, she added.
The TTTA submitted a letter to the Public Health Ministry explaining its concerns two weeks ago.
The new provisions have undergone four public hearings and are open to the public for comments. The process should be finished next month. Then the provisions will be submitted to the health minister and the cabinet.
http://www.who.int/mediacentre/news/releases/2012/illicit_tobacco_20121112/en/index.html#
News release
12 November 2012 | Seoul, Republic of Korea –The delegates of more than 140 Parties to the WHO Framework Convention on Tobacco Control (WHO FCTC) adopted a new international treaty Monday, setting the rules for combating illegal trade through control of the supply chain and international cooperation. The Protocol to Eliminate Illicit Trade in Tobacco Products commits countries to establishing, as a central measure, a global tracking and tracing system to reduce the illicit trade of tobacco products.
Illicit trade in tobacco products
“The elimination of all forms of illicit trade in tobacco products, including smuggling and illegal manufacturing, is an essential component of tobacco control,” says Ambassador Ricardo Varela, President of the Conference of the Parties (COP) to the WHO FCTC. “In adopting this new Protocol today by consensus, countries have reiterated their historic commitment towards protecting the health of their citizens, particularly the young and vulnerable.”
A global problem
Illicit trade in tobacco products is a global problem. It undermines health objectives, imposes additional strain on health systems and weakens tax and other measures designed to strengthen tobacco control. It leads to substantial revenue losses to governments around the world but generates vast financial profits for illegal traders. These are often used to fund transnational criminal activity.
Defining unlawful conduct
“Eradicating illicit trade in tobacco products constitutes a clear win-win situation for governments and their people,” says Dr. Haik Nikogosian, Head of the Secretariat of the WHO FCTC. “The new Protocol establishes what actions constitute unlawful conduct and sets out related enforcement and international cooperation measures, such as licensing, information-sharing and mutual legal assistance that will help counteract and eventually eliminate illicit trade.”
After today’s adoption by the Conference of the Parties, the procedural steps for the Protocol on Illicit Trade in Tobacco Products to enter into force are:
Reaching consensus
The Protocol to Eliminate Illicit Trade in Tobacco Products was drafted and negotiated by an Intergovernmental Negotiating Body, mandated to undertake this work by the COP at its second session in 2007.
After four years of negotiations, the Intergovernmental Negotiating Body held its fifth and final session from 29 March to 4 April 2012 in Geneva, where the Parties reached consensus on the draft Protocol.
The COP is the central organ and governing body of the Convention and is currently meeting for the fifth time since the treaty entered into force in 2005. The number of Parties to the Convention has grown steadily over the years, from the 40 parties that brought the treaty into force in 2005, to 113 at the first session of the Conference of the Parties in 2006, and 176 as of today.
The WHO FCTC was adopted by the World Health Assembly on 21 May 2003 and entered into force on 27 February 2005. It has since become one of the most rapidly and widely embraced treaties in United Nations history.
For more information please contact:
Christian Lindmeier
Media & Communications Officer
Convention Secretariat
WHO Framework Convention on Tobacco Control
Telephone: +41 22 791 3282
Mobile: +41 79 217 3439
Mobile (in Seoul during COP5): +82 (0)10 4970 8634
E-mail: lindmeierch@who.int
Download PDF : FCTC_COP5_7-en
http://www.bdlive.co.za/opinion/letters/2012/11/09/letter-industry-is-complicit
LETTER: Industry is complicit
by , November 09 2012, 06:55 | 0 Comment(s)
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Picture: THINKSTOCK
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Tobacco industry cries foul on proposed WHO regulations
Illegal cigarettes costing billions in lost taxes
THE tobacco industry organising a conference against tobacco smuggling is akin to Al Capone sponsoring an anti-bootlegging symposium (Customs lets loose copper-sniffing dogs to fight smuggling, November 6).
The industry is part of the problem and not part of the solution. Multinational cigarette company executives have been found guilty of complicity in cigarette smuggling and tax evasion on a huge scale by the courts in Canada, Hong Kong and South Africa.
With perverse timing, the industry conference precedes a World Health Organisation meeting in Korea next week that is likely to adopt a treaty against the illicit trade in tobacco.
The draft treaty provides for international co-operation between parties against smuggling and a clampdown on the illegal activities of the manufacturers.
It proposes securing the supply chain by introducing a global tracking and tracing system, and requires manufacturers to be licensed and to exercise due diligence. So the solution is not to ask the fox to guard the hen house but to defang the fox.
Dr Yussuf Saloojee
National Council Against Smoking
Search term: http://www.bbc.co.uk/news/world-asia-china-20183182?print=true
Cigarettes were distributed in Hong Kong’s many public housing estates
Customs officials in Hong Kong have cracked down on a smuggling ring that delivered contraband cigarettes to its clients’ homes.
Officers have arrested 119 people and seized 3m untaxed cigarettes, worth almost $1m (£575,000).
The group had turned to home deliveries after a clamp-down on stores selling illicit cigarettes.
It had been handing out fliers in Hong Kong’s public housing estates.
Wan Hing-chuen, a divisional commander at the territory’s Customs and Excise Department, said the operation had been run from a warehouse and distribution centres.
“It’s very easy because in Hong Kong there are so many public housing estates, they just employ a few persons to deliver the leaflets,” he said.
The cigarettes were being sold at less than half the typical retail price.
So far this year Hong Kong customs officers have seized 55 million cigarettes and broken up more than 200 distribution centres.
Under Hong Kong law, people found guilty of buying or selling untaxed cigarettes face a fine of up to HK$1m($130,000, £80,000) and up to two years in prison.