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Cigarette Smuggling

Levy Increase Not The Answer

Mar 5th, 2009
by AdminCTA.
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Updated on Mar 05, 2009 – SCMP

The desire to curb teenage smoking seems to dominate government officials to such an extent that they overlooked that the taxes on tobacco amount to regressive tax.

Smokers, many of whom are lower on the financial totem pole, are already reeling in this economic crisis and will bear the brunt of yet another ill-conceived tax policy. When prices of cigarettes are much higher than on the mainland illegal smuggling ensues and there have already been press reports that this is happening.

Past cigarette tax rises have not arrested the increase of smokers in Hong Kong. Reckoning with the futility of the policy has been deferred by a government influenced by lobby groups.

As many smokers will tell you giving up smoking and replacing it with a salubrious habit takes tremendous determination.

We should be lending sympathy to them and not harbouring scorn bordering on retribution.

The government and the lobby groups in this economic crisis should be managing the welfare of all Hong Kong citizens. People on low incomes should be receiving aid and not be paradoxically subjected to a levy.

Raising the cigarette tax to curb teenage smoking is a handier excuse for evading a less appealing remedy to an intractable problem.

Similar to preventing high school pregnancies curbing teenage smoking is the responsibility of schools and parents that entails effort and time.

To think that raising the cigarette tax will magically lower teenage smoking is akin to the admission that manipulating the price of condoms will have an effect on teenage sex.

Jack Teh, Clear Water Bay

The Dial-A-Pack Cigarette Gangs

Mar 1st, 2009
by AdminCTA.
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Clifford Lo – Updated on Mar 01, 2009 – SCMP

Illegal cigarettes are being sold for as little as HK$6 a pack to attract customers – part of a sophisticated trafficking operation designed to elude police and customs officers – say law enforcement sources.

The gangs hand out fliers across the city listing brands, a price list and contact numbers – or post them in residents’ letter boxes – and take orders by phone, the sources say.

Customs chiefs are braced for a rise in tobacco smuggling following the 50 per cent rise in tobacco duties announced in last week’s budget speech. The increase pushed the average price of a pack of 20 cigarettes up from HK$29 to HK$39.

The government hopes the rise will persuade between one in five and one in 10 smokers to quit the habit.

“After taking orders, illicit cigarettes are delivered to your home or pickups are arranged in parks or at MTR station exits,” a government source said.

“To avoid being caught in a sting, illegal traffickers will observe buyers and the location of the transaction before doing business. New buyers may be asked to leave money on a park bench before being told where to pick up the goods.”

Mainland visitors, housewives, drug addicts and Vietnamese residents had been recruited to distribute the goods and run the business, this source said. Counterfeits sell for HK$6 to HK$10 a pack; smuggled genuine cigarettes cost HK$15 to HK$17. Another source said most buyers of illegal cigarettes were from lowincome families and the illegal traders did most of their business in public housing estates. Customs officials said crackdowns on areas where the gangs operate had cut into their sales. However, authorities were concerned that the rise in tobacco duties would spur an increase in the trade.

Cross Street in Wan Chai is one of the places where the illegal trade flourishes. The vendors hide the cigarettes in an alley or nearby building.

“Now traffickers have resorted to a phone-order service to evade detection and arrest,” one source said. “Some traffickers only take orders from regular customers or those who can say a password.”

The Customs and Excise Department dealt with 1,570 cases of illegal-cigarette smuggling, distribution, sales and storage last year, 14 per cent fewer than in 2007. Officers arrested 1,170 people and seized more than 73 million cigarettes.

Most of the illegal cigarettes are smuggled from the mainland.

Ben Leung Lun-cheung, head of the department’s land boundary command, said: “We are determined to crack down on the import, storage and sale of illicit cigarettes.”

Raising Taxes Just The First Step On Anti-Smoking Front

Mar 1st, 2009
by AdminCTA.
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Updated on Mar 01, 2009 – SCMP

Stepped-up smuggling activities are to be expected after the government raised tobacco duty by 50 per cent. But the brazen manner in which some criminals hand out fliers in busy streets and drop them in residential mailboxes to promote the sale of illegal cigarettes is deeply troubling. Customs and police have anticipated such developments; they must make sure they have adequate resources and manpower to nip such criminal activities in the bud.

It was right to raise the duty on cigarettes; we had not done so since 2002. As a result, our city had been selling some of the cheapest cigarettes in the developed world. Officials had cited the danger of encouraging tobacco smuggling as a reason to avoid raising taxes. Now they have bitten the bullet. By making smoking expensive, it will help deter people from starting the habit and encourage addicts to quit. The revised duty will not only help boost government coffers at a time of a rising deficit, but save many lives. It is especially important to discourage youngsters from taking up the deadly habit.

However, law enforcement against smugglers and illegal sellers must be coupled with education and medical services to help smokers quit. And anti-smoking messages should be promoted. Unfortunately, with an illegal pack selling for as little as HK$6, more smokers may be tempted to buy illegal cigarettes in this downturn. Such people may need to be nudged in the right direction.

Is it not more sensible to quit than to resort to dealing with criminals and waste money on illegal tobacco that will damage one’s health? But to get this message across, more community resources and campaign drives are needed. The Department of Health and some non-government groups run free or highly subsidised smoking-cessation services. Schools should also be given more resources to educate young people, but with more effective and creative messages so they get the point. This summer will see the smoking ban extended to all enclosed public spaces. Many bars are lobbying to extend their exemption from the ban. Officials must stick to their guns, because our city is finally moving in the right direction on the anti-smoking front.

Health Hotline Flooded Since Tobacco Duty Raised

Feb 28th, 2009
by AdminCTA.
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Hotline flooded since tobacco duty raised 50pc in budget

Ng Kang-chung – SCMP – Feb 28, 2009

The decision to raise the tobacco duty in the budget to discourage people from smoking seems to have had an immediate effect – a hotline that helps people kick the habit has been flooded with inquiries.

By 4pm yesterday there had been 403 inquiries to the Department of Health’s hotline – 1833 183. It received 322 calls on Thursday, against a daily average of just 12 last year.

The hotline is manned by nurses who provide counselling. After hours, a computerised call-handling system provides information on quitting smoking.

Financial Secretary John Tsang Chun-wah announced the 50 per cent increase in tobacco duty in his budget speech on Wednesday. With immediate effect, the duty on cigarettes increased from around 80 cents per cigarette to about HK$1.20.

The increase pushed the retail price of a pack of 20 cigarettes to about HK$39, up from HK$29.

Mr Tsang estimated that 10 per cent to 20 per cent of smokers would opt to quit after the duty increase.

Meanwhile, the health minister disclosed yesterday that the idea of imposing an import ban on cigarettes was once considered as a move to force people to stop smoking.

Secretary for Food and Health York Chow Yat-ngok also warned the government could one day reconsider such a move.

Dr Chow made the comments during a radio phone-in programme in which he faced a torrent of criticism over the move to increase tobacco duty by 50 per cent.

In yesterday’s RTHK Talkabout programme, one smoker, a Mr Ching, asked why the government did not simply outlaw tobacco imports.

Dr Chow said: “It was not that we had not thought of this idea. But society is changing and the habit [of smoking] can change by not [banning imports]. In the past 10 to 20 years, we have increased tobacco duty and strengthened education in the hope of encouraging people to quit smoking.

“Many places in the world are using more or less the same means.”

Repeatedly challenged by Mr Ching over an import ban, Dr Chow said: “We have not ruled that out. One day, we might consider that or carry it out.”

But he was quick to add: “Hong Kong is a free society. We hope people can kick the habit willingly.”

According to figures from the Department of Health’s Tobacco Control Office, the proportion of smokers dropped from 14 per cent of the population in 2005 to 11.8 per cent in 2007-08.

The percentage of young smokers – aged between 15 and 19 – also fell, from 3.5 per cent of the youth population in 2005 to 2.4 per cent in 2007-08.

But Dr Chow said he was still worried. “Young smokers now consume 11 sticks every day, as compared to nine sticks in 2005.”

On media reports about a surge in smuggling of cigarettes after the duty was increased, Dr Chow said: “Customs will have sufficient measures and resources to deal with this problem

50pc Tobacco Duty Rise Brings Confusion

Feb 26th, 2009
by AdminCTA.
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BUDGET 2009 – Ella Lee and Danny Mok – Feb 26, 2009 – SCMP

Confusion arose last night over cigarette retail prices, with two major tobacco agents taking the unusual step of not raising charges immediately after a 50 per cent increase in tobacco duty was announced in the budget.

Some retailers immediately raised prices, while others imposed a limit on the number of packs each customer could buy.

British American Tobacco Hong Kong and Hong Kong Tobacco did not raise charges yesterday, along with most 7-Eleven outlets and other vendors.

But most 7-Eleven stores allowed each customer to buy only two packs a time. Smokers were seen rushing for cigarettes at outlets of Circle K, which did not raise charges.

Most petrol stations did not increase their prices.

However, some vendors raised prices by HK$8 a pack after the budget.

The 50 per cent increase in duty was welcomed by anti-smoking activists. However, they were quick to warn that the measure should not lead to any “trade-off” with the tobacco industry.

Financial Secretary John Tsang Chun-wah announced that the duty would be increased from about 80 HK cents per cigarette to HK$1.20, with immediate effect. The duty for cigars was increased from HK$1,035 per kg to HK$1,553. Tobacco duty was last raised in the 2001-02 financial year – from 76 cents to 80 cents a cigarette.

Executive secretary of the Tobacco Association of Hong Kong Raza Zulfiqar said the trade was disappointed with the “drastic increase” in tobacco duty, adding that it would only stimulate smuggling of cigarettes. He said individual tobacco companies would decide later on the new retail prices of their products.

A senior government source said the increase was not aimed at increasing revenue for the administration but at reducing the smoking population. There are about 754,800 smokers in Hong Kong, or 13.2 per cent of the population aged over 15. Fears had been raised about the increasing number of young and female smokers in Hong Kong, the source said.

Secretary for Food and Health York Chow Yat-ngok said the measure could deter more young people from smoking.

Tobacco tax has been increased from HK$16 to HK$24 per pack of cigarettes, with retail prices of some popular brands expected to rise from about HK$29 to HK$37 a pack.

The anti-smoking group Clear the Air said the government must legislate for the excise tax to be not less than 80 per cent of final retail cost, to prevent tobacco companies reducing prices to offset the tax rise.

Anti-tobacco groups had been calling for the administration to increase tobacco duty after government figures showed a 13.8 per cent rise in cigarette consumption since 2006, despite a smoking ban in restaurants.

Anthony Hedley, a professor in community medicine at the University of Hong Kong, welcomed the move and said it plugged a big hole in tobacco control.

“Credits should go to the NGOs, the Department of Health and the Food and Health Bureau which have pushed for the increase,” he said.

Cigarette Stocks Gone in Puff of Smoke

Feb 26th, 2009
by AdminCTA.
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Timothy Chui and Grace Tsoi – Hong Kong Standard – Thursday, February 26, 2009

Smokers eager for a pre-budget- priced nicotine hit cleared convenience stores across the territory of cigarettes yesterday.

News that the city’s tobacco tax was being increased by 50 percent – effective immediately – just before noon left stores short or sold out of cigarettes by early evening.

One store clerk said his shop was cleaned out of 2,700 packs, with buyers breaking brand loyalty to snap up all 40 or so brands on offer.

Street vendors also tried to make a killing by upping the price of pre- budget cigarettes before the 50 percent hike in tobacco duties announced by John Tsang took effect.

Tsang said tobacco duties would rise by HK$8 per pack, taking the total duty per pack to HK$24 from HK$16.

Last night Shau Kei Wan street hawkers were charging HK$37 a pack.

The duty hike will boost the goverment’s take from HK$3 billion to HK$3.8 billion a year, said a government source who put the number of smokers in the SAR at about 600,000.

He added that while progress had been made in making male smokers quit, younger female smokers were taking their place.

Professor Judith Mackay, director of the Asian Consultancy on Tobacco Control and senior policy adviser to the World Health Organization, called the budget’s only tax hike a “much- needed, overdue and timely increase.”

She said cigarettes were getting cheaper in real terms because tobacco duties had remained the same over the past eight years.

She added that every jurisdiction that increased tobacco duties saw declines in smoking rates, especially among the young.

Mackay said there was a 4 percent decrease in smoking rates for every 10 percent increase in tax, while a government source pegged the figure at 6.3 percent per 10 percent.

Anti-smoking group Clear The Air called for a doubling in manpower for the Tobacco Control Office, and said legislation should be passed to bind tobacco duties at no less than 80 percent of final retail costs to prevent tobacco companies from absorbing the hike.

A Japan Tobacco International spokeswoman does not see the number of smokers dropping after the tax hike. She pointed out that the average daily consumption during the early 1990s was steady despite a 200 percent tax hike in March 1991.

She warned higher taxes will lead to more cheap illegal cigarettes.

A Philip Morris Asia spokeswoman echoed the smuggling concerns.

Three Jailed For Cigarette Smuggling

Feb 25th, 2009
by AdminCTA.
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Loretta Fong – Feb 25, 2009 – SCMP

The former chairman of Hong Kong-based Nanyang Brothers Tobacco Co and two employees from another company were jailed yesterday for pocketing commissions and smuggling cigarettes to the mainland.

Nanyang Brothers, a subsidiary of publicly listed Shanghai Industrial Holdings, made the Double Happiness brand of cigarettes, the brand smuggled to the mainland.

In the District Court, Lu Dayong, 60, who has fled the city, was sentenced to 4-1/2 years in jail, and his lover, Ko Kit, 40, was jailed for 3-1/2 years. Ko was director of Hang Chun Trade Development.

The pair was found guilty of a joint charge of conspiracy to accept an advantage from a cigarette trader, Golden Leaf International Development. They received more than HK$7.5 million.

Chan Kai-san, 41, a Hang Chun sales manager, who was convicted of a count of conspiracy to defraud Nanyang Brothers, was jailed for two years.

In sentencing, Judge Joseph Yau Chi-lap said “corruption struck at the heart of commercial and public life”.

He said Hong Kong had become one of the most corruption-free places in the world, and unscrupulous individuals would not be allowed to ruin the hard work of officials over the past 35 years by offering or accepting bribes.

The court had heard that the offences happened between December 2002 and February 2004. The trio were caught on covert surveillance discussing the cigarette shipments or commission payments. Anti-graft agents found Lu kept a diary of the transactions.

In sentencing Ko, Judge Yau rejected the claim of her defence counsel, Joseph Tse Wah-yuen, who argued she did not benefit from the payments.

Judge Yau said that Lu, as the former chairman of Nanyang Brothers, seriously breached his fiduciary duty by defrauding the company. He said the amount of cigarettes smuggled was substantial because evidence showed there was a price war over cigarettes due to oversupply in Guangdong.

Judge Yau said the scheme was well-planned and highly sophisticated, which added gravity to the offence.

High Tax Rise Will Not Work

Feb 25th, 2009
by AdminCTA.
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Updated on Feb 25, 2009 – SCMP

I agree that increasing the tax on tobacco can curb youth smoking.

This claim has been made by the World Health Organisation and the World Bank.

However, I do wonder why the Committee on Youth Smoking Prevention has proposed exactly doubling the tax (“Call for doubling of tobacco tax to stop young lighting up”, February 18). Of course, if the increase in tax is too small, it will not act as an effective deterrent. Likewise, if it was too high an increase, it might be counter-productive.

High prices will undoubtedly discourage young people from buying cigarettes on which duty is paid. Instead, they might be tempted to buy cheaper, illegal cigarettes smuggled from the mainland. This will only help the triads, while poor cigarettes will only pose an ever greater health risk. More research is needed before deciding by how much to raise the tax.

Wong Pui-lam, Kwun Tong

Smoking Rise Draws Call To Put Up Duties

Jan 31st, 2009
by AdminCTA.
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Cigarette use up 13.8pc despite restaurant ban

Mary Ann Benitez – Updated on Jan 31, 2009 – SCMP

Anti-tobacco groups are calling on the financial secretary to raise tobacco duties after government figures show a 13.8 per cent rise in cigarette consumption since 2006 despite a smoking ban in restaurants. Low tobacco duties – which have not changed since April 1, 2001 – have made Hong Kong cigarettes among the cheapest available in developed economies.

Customs and Excise Department figures show that 38.2 million more cigarettes per month were consumed last year than in 2006.

The ban on smoking in indoor public places was introduced in July 2007, but some bars and karaoke clubs were given a two-year exemption. That exemption will end in July, but already there has been a movement to postpone the move.

The pressure to raise the tobacco tax is greater this year due to the financial downturn, and anti- tobacco groups say it is high time the government increased tobacco duties to cut consumption, especially among young people.

The Council on Smoking and Health (Cosh) has been using the internet to rally support for a policy that would increase duties by 5 percentage points above inflation.

Cosh said it would submit the virtual signatures from its campaign and its proposal for a so-called health tax policy to Financial Secretary John Tsang Chun-wah before he delivers the 2009-10 budget on February 25.

Customs figures show that smokers lit up 3.79 billion cigarettes last year, compared with 3.33 billion in 2006, the year before the partial ban went into force. In 2007, 3.49 billion cigarettes were consumed.

“The remaining smokers are consuming more. The price is as cheap as in 2001 and they can still go out to pubs and karaokes and nightclubs and smoke to their hearts’ demise,” said Clear the Air’s smoking committee chairman James Middleton.

“The figures in Hong Kong set an example to the world of how not to enact a smoking ban.”

The duty was last raised in the 2001-02 financial year – from 76 cents to 80 cents per cigarette.

Anthony Hedley, professor of the University of Hong Kong’s department of community medicine, said he was “very pessimistic” that Mr Tsang would choose public health over business.

Philip Morris Asia cautioned against excessive increases in the tobacco duty, saying it would support “regular and moderate tax increases” but there should be no change in times of deflation.

A spokeswoman said excessive tax would encourage smuggling, as was seen in the 1990s.

Customs figures show a decline in smuggling attempts in recent years.

The anti-tobacco lobby said census projections for restaurant receipts last year – the first full year the partial smoking ban had been in place – were HK$78.21 trillion, more than 27 per cent up on 2006 receipts. The figures were evidence, the campaigners said, that the smoking ban had not hurt the restaurant trade, as the industry had feared.

Professor Hedley said top officials “need to take tobacco out of Hong Kong business, stop pretending this is like any other business”.

Chinese University department of community and family medicine professor Wong Tze-wai said the government should view tobacco in the same category as petrol.

“We put tax on items that create some harm for other people, such as petrol,” Professor Wong said. “Why do we want to tax petrol? [It is] because we want to discourage its consumption and excessive pollution.”

A spokesman for Mr Tsang said: “Public consultation [on the budget] is in progress now. We welcome all views and we have an open mind.”

Smuggling Of Cigarettes To The Mainland

Jan 23rd, 2009
by AdminCTA.
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Three convicted over smuggling of cigarettes to the mainland

Loretta Fong – Updated on Jan 23, 2009 – SCMP

The former chairman of Hong Kong-based Nanyang Brothers Tobacco Co and two company officials were convicted in the District Court of pocketing commissions and smuggling cigarettes to the mainland.

Lu Dayong, 60, who has fled the city, and his lover, Ko Kit, 40, a director of Hang Chun Trade Development, were found guilty of a joint charge of conspiracy to accept an advantage from a cigarette trader, Golden Leaf International Development. They received more than HK$7.5 million.

The pair, with Chan Kai-san, 41, a Hang Chun sales manager, were also convicted of a count of conspiracy to defraud Nanyang Brothers. The trio were acquitted of a bribery charge.

Nanyang Brothers, a subsidiary of publicly listed Shanghai Industrial Holdings, made the Double Happiness brand of cigarettes in Hong Kong. Double Happiness was the brand smuggled to the mainland.

The marathon trial of the cigarette smuggling racket, which was delayed for months, finally began last June.

Defence lawyers had contested the legality of the Independent Commission Against Corruption’s investigation, arguing evidence collected by a bugging device was inadmissible because it violated the Basic Law.

Judge Joseph Yau Chi-lap rejected the argument, and a request for a judicial review of that decision was also rejected.

The prosecution said the three were caught during covert surveillance discussing the cigarette shipments or commission payments, and said anti-graft agents found Lu kept a diary on the commission payments and cigarette shipments. The offences happened between December 2002 and February 2004.

The prosecutors said Lu approved Hang Chun and Golden Leaf as overseas distributors for Nanyang Brothers cigarettes. The cigarettes were smuggled to the mainland from Hong Kong via the Philippines, Cambodia and Vietnam, the court heard.

Prosecutors said the commissions were paid through various parties from the mainland in the form of deposits, cash and company or casino cheques to bank accounts controlled by unknown conspirators and Ko. She held the funds on Lu’s behalf in her bank accounts.

Judge Yau said evidence showed Lu controlled Hang Chun, despite Ko being listed as its director. He said Lu concealed the fact that Double Happiness cigarettes were actually being sold to a company Lu controlled and said this was dishonest. Judge Yau said their dishonest act caused economic loss to Nanyang Brothers and put the company at economic risk.

Sentencing for Ko and Chan was adjourned to February 20, pending background reports.

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