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Europe’s largest pension fund to drop tobacco and nuclear weapons investments

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S&D calls for traceability of tobacco in Europe

An independent traceability system for tobacco products is urgently needed, according to the Socialists & Democrats (S&D) Group in the European Parliament.

https://www.neweurope.eu/article/sd-calls-traceability-tobacco-europe/

But some members of the European Parliament’s health and environment committee raised objections that would have delayed the adoption of the traceability system – something that would benefit the tobacco industry.

S&D wants to guarantee full implementation by 2019.

“We have no time to waste. Nearly 10% of the global cigarette trade is illicit,” said S&D spokesperson on this issue, Gilles Pargneaux MEP. “This poses severe risks to public health due to increased accessibility and affordability. Moreover, illicit tobacco trade evades revenue collection estimated at €10bn annually in Europe.

Tobacco is one of the most smuggled commodities in the world and the profits from illicit trade feed terrorism and international and local crime, including money laundering.

“Europe will have the first regional system to trace tobacco products and will set an example for other countries to follow. Countries like Turkey and Kenya already have such a system and they have had very good results. The credibility of the EU is at stake: we have to deliver and implement an efficient system that fights illicit trade and protects public health,” said Pargneaux.

In turn, S&D spokesperson on health, Miriam Dalli MEP, explained that the track and trace system adopted by the European Union is not the perfect solution but it works well. “Objecting to only end up without a system is not an option for us. We would only be playing into the hands of those within the tobacco industry who want to gain time and delay any transparent traceability measure. We can never accept this. It is vital to have a traceability system that is fully independent from the tobacco lobby.”

Possible effects of raising tobacco taxes across the EU

Increasing cigarette prices through taxation could reduce cigarette consumption and smoking related deaths across EU countries. This is according to a study published today in BMC Public Health which modelled a 10% tax increase on tobacco. Here to tell us about the model, how different EU countries would be affected, and the potential policy implications is Christian Schafferer, author of the article.

Christian Schafferer 21 Sep 2017

In the European Union (EU), approximately 700,000 people die of smoking-related diseases every year. The reduction of tobacco consumption has thus become one of the major social policies of the EU.

The tobacco control policies (MPOWER) proposed by the World Health Organization (WHO) in 2008 serve as a guideline for the health authorities of the EU member states. The six MPOWER measures mandate (i) increases in the tobacco tax; (ii) monitoring of tobacco usage; (iii) support for quitters; (iv) creation of a smoking-free environment; (v) warning against the dangers of tobacco; (vi) and banning tobacco advertising, promotion and sponsorship.

Numerous empirical studies have demonstrated that most consumers, when confronted with higher retail prices, indeed reduce consumption.

Among the MPOWER measures, taxation is the most common single policy tool to control tobacco use. Economic theory suggests that increasing tobacco taxes will result in higher direct costs for smokers and thus lower consumption.

Theoretically, the tobacco industry could absorb the additional costs to prevent higher retail prices, but, in reality, increased costs are passed on to the consumers.

Numerous empirical studies have demonstrated that most consumers, when confronted with higher retail prices, indeed reduce consumption, while others switch to lower-priced products or turn to smuggled goods.

Modeling a 10% tax increase

In our study, we estimated the effects of a hypothetical cigarette price increase of 10% on consumption, tax revenues and death toll of smoking in 28 EU countries.

Unlike previous studies, our statistical model also accounted for the fact that income affects the responsiveness of consumers to price changes. Research has shown that smokers with high disposable income are less affected by rising cigarette prices than those with lower income. In other words, the price elasticity of demand changes with income (income threshold effect).

The price elasticity of demand is used to measure changes in demand of goods in response to changes in price. It gives the percentage change in quantity demanded in response to a one percent change in price.

Our statistical model separates the observed 28 countries into three income clusters (regimes), assuming that all of the countries within a cluster have about the same response patterns to price increases. Using data for the years 2005 to 2014, our model estimated the price elasticity of each income cluster.

Nicotine use would be reduced by 12.27% in Bulgaria and Romania; by 8.29% in Latvia and Poland; and by 5.03% in the EU24 countries.

Based on the elasticity figures, we were able to estimate the possible effects of a hypothetical price increase of 10% on consumption, tax revenues and the number of averted smoking-attributable deaths. The latter figure derived from the simulated impact of price increments on the reduction in smokers and was adjusted for the fact that smoking cessation still carries considerable risks of early death.

The results of our study revealed that higher taxation would be considerably more effective in reducing consumption as well as incidences of smoking-related deaths in the two less developed regimes than in the remaining 24 countries (EU24) belonging to the third income regime. Specifically, nicotine use would be reduced by 12.27% in Bulgaria and Romania; by 8.29% in Latvia and Poland; and by 5.03% in the EU24 countries.

Unlike other measures, such as bans on tobacco advertising, taxation not only effectively decreases tobacco consumption but, in general, also has the beneficial side effect of increasing national tax revenues. Our simulation showed that although tax revenues increased by 7.03% in Latvia and Poland, and by 3.15% in the EU24 area, revenues dropped by 1.41% in the least developed countries, Bulgaria and Romania.

Different policies for different countries

What are the policy implications? As the results of the study show, there are three income regimes among the observed 28 European countries. Since each regime is differently affected by cigarette taxation, different policies must be adopted to fight nicotine use. Specifically, other measures to control tobacco use, such as restrictions on advertisements, pictorial warning labels and cessation assistance, are necessary in high-income countries to compensate for the income threshold effect.

Moreover, as the study has shown, higher taxation leads to significant increases in tax revenues in high-income regimes, but in poorer countries it is more likely to lead to considerable losses in tax revenues. Health authorities in less developed countries may thus lack crucial funding to implement anti-smoking measures. External funding (donations from other European countries) would thus be required to ensure success in combating cigarette use.

Illicit trade of tobacco products has not been included in the study, as reliable data could not be obtained for all countries. Moreover, data on cigarette consumption analysed in this study refer to factory-made (FM) cigarettes. Roll-your-own (RYO) tobacco products have become popular in the EU in recent years and may influence consumption behavior. Further research on price effects may thus address the issue of illicit trade and RYO cigarette use.

The effects of a rise in cigarette price on cigarette consumption, tobacco taxation revenues, and of smoking-related deaths in 28 EU countries

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Commission: Plain tobacco packaging does not damage the economy

A European Commission spokesperson has told EURACTIV.com that any loss in the tobacco industry’s turnover arising from health warnings or plain packaging should be offset against the cost of treating people with smoking-related diseases.

https://www.euractiv.com/section/health-consumers/news/commission-plain-tobacco-packaging-does-not-damage-the-economy/

The revised EU Tobacco Products Directive came into force in May 2016 and introduced stricter measures on packaging. For example, 65% of a packet’s surface should include health warning pictures and text.

Member states are also free to take additional measures, such as enforcing the use of plain packaging. France, Hungary, Ireland, Slovenia and the UK are among the countries that have already adopted this measure.

For the World Health Organisation and public health NGOs, plain packaging is an ideal tool to reduce the appeal of smoking. On the other hand, the tobacco industry claims it amounts to a “brand ban”.

Ben Townsend, vice-president for Europe at Japan Tobacco International (JTI), recently told EURACTIV that the ban simply doesn’t work.

“In Australia, the first country to introduce plain packaging more than four years ago, government data showed that the decline in smoking has actually stalled,” he said.

Threats against Dublin

When the British government introduced plain packaging, the tobacco industry attempted to block it by invoking intellectual property rights. But it lost the court case.

In Ireland, press reports referred to industry “threats” about the country’s economy.

Dublin decided that all tobacco products manufactured for sale in Ireland from 30 September 2017 must be marketed in standardised retail packaging.

Ireland’s Ministry of Health told EURACTIV in a written statement that a wash-through period would be allowed, meaning any products manufactured and placed on the market before the September cutoff date will be permitted to stay on the market for a 12-month period (i.e. until 30th September 2018).

According to the ministry, the aim of standardised packaging is to make all tobacco packets look “less attractive to consumers, to make health warnings more prominent and to prevent packaging from misleading consumers about the harmful effects of tobacco”.

But the Irish Independent reported earlier this month that the three tobacco giants (British American Tobacco, Imperial Tobacco Group and JT International) had threatened to undermine the Irish and EU economy in response to the measure.

The three companies sent a letter to former European Commissioner for Economic and Monetary Affairs and the Euro Olli Rehn warning him about the catastrophic implications of plain packaging.

In the letter, according to the Irish newspaper, the tobacco firms indicated they would seek compensation for damages which could “undermine savings […] and negatively impact the Irish economy”.

European Commission: There is no loss

Contacted by EURACTIV, the European Commission confirmed that the directive allows states to introduce further measures relating to plain packaging where they are justified on public health grounds, are proportionate and do not lead to hidden barriers to trade between member states.

But the executive does not support the argument that plain packaging comes at a financial “cost” to the European economy.

“Any loss in the industry’s revenues or a country’s tax revenues from tobacco products arising from e.g. health warnings or plain packaging should be counterbalanced against the cost to the economy of treating people with smoking-related diseases,” a Commission spokesperson said.

The EU official pointed out that healthcare to treat people with smoking-related diseases costs €25.3 billion every year in the EU and an additional €8.3bn is lost to absenteeism/premature retirement.

“This is a total cost of €33.6bn a year,” the spokesperson emphasised, adding that a 2% reduction in smoking alone would translate into annual healthcare savings of approximately €506 million for the EU.

Bulk tobacco smuggling increases, worrying OLAF and Commission

Illegal sale of cut tobacco is on the rise in Eastern and Southeastern Europe, depriving state budgets of millions of euros in unpaid taxes.

https://www.euractiv.com/section/agriculture-food/news/bulk-tobacco-smuggling-increases-worrying-olaf-and-commission/

The EU’s anti-fraud office OLAF says the reasons for the increase are not currently clear, while the Commission is considering extending the excise system to raw tobacco to address the situation.

‘Bulk’ or ‘loose’ tobacco is a type of tobacco usually sold in non-branded packs or bags on the black market. It can be used in the counterfeit cigarette production but also legally in ‘Roll Your Own’ (RYO) cigarettes.

According to a study published last December by Crime & Tech, a spin-off company of the Università Cattolica del Sacro Cuore and Transcrime, the trend of illicit trade in bulk tobacco is on the rise. In the whole of Europe, more than 48% of the total volume of cut tobacco in 2015 was consumed illegally.

In the EU alone, the amount of illegally sold bulk tobacco consumed in eight member states accounted for 32.2% of the total cut tobacco consumption.

In at least nine European countries, seven of which are in the Balkans, where tobacco growing is a tradition, illegal bulk tobacco accounts for more than half of the total amount of cut tobacco consumed. The countries are Montenegro, Serbia, Bosnia and Herzegovina, Poland, Croatia, Slovakia, Albania, Kosovo and Bulgaria.

Massive tax losses

In addition, the study estimates that the illegal trade of bulk tobacco generates a shortfall of nearly €1 billion in tax income for the member states.

Poland has already been severely hit by illicit trade in cigarettes and bulk tobacco further worsened the situation.

In Croatia, the newest EU member, the potential revenue loss is estimated at €88.9 million with bulk tobacco representing a whopping 84.9% of the share of fine cut tobacco consumption.

OLAF: The situation is unclear

Contacted by EURACTIV, OLAF’s press office stressed it was aware of the results of the study and the increase of bulk tobacco seizures in Europe.

“However, the reason for that increase is not currently clear,” OLAF said in a written reply. It has yet to be clarified whether this is mainly a domestic problem concerning tobacco growers in some EU member states or if there are wider implications involving illegal imports from third countries, it added.

“According to our information, the main countries affected in the EU were identified as Poland, Greece, Croatia, Bulgaria, Hungary, Romania, Slovakia and Slovenia,” OLAF emphasised.

Extending the excise system?

The EU’s Budget Commissioner Günther Oettinger recently replied to a parliamentary question on the issue by recognising that smuggling of bulk tobacco was a “growing and worrying phenomenon”.

In an effort to address the situation, the Commission is carrying out a review of its directive on the excise duty applied to manufactured tobacco, he said.

“One of the issues the Commission is looking at in that context is whether to extend the excise system to raw tobacco, which is currently exonerated from excise duties,” Oettinger noted.

A Commission spokesperson told EURACTIV that EU member states have instructed the executive to review the current rules governing excise duty on tobacco. A public consultation to gather views on the possible options for a revision of the rules has now finished.

“But before taking any decisions, we also need to carry out an impact assessment and a lot more technical work,” the spokesperson stressed, underlining that it was too early to predict the conclusions of this review.

“The Commission will carefully listen to EU governments and fully consider their requests and views […] we would also recall that any proposal would need the unanimous support of all 28 EU governments for it to be approved,” the EU official added.

Sources familiar with the issue have told EURACTIV that adding a particular product to the excise system does not necessarily mean putting an extra tax on them but simply makes them easier to track.

‘Extending the excise system’ refers to the Excise Movement and Control System (EMCS) which monitors the movements of excise goods within the EU until the duties are paid or the goods are exported.

The idea to extend the excise system to raw tobacco would provide more information on the movement of raw tobacco and help the fight against illicit trade.

In practice, this would mean that raw tobacco would become an excise good with a zero rate, EURACTIV has been informed.

The same sources explained that this option is just one of the ideas but the benefits of enhanced control on one hand and administrative burden and compliance cost on the other would need to be weighed carefully.

Big tobacco bullies the global south. Trade deals are their biggest weapon

The industry has a long history of using trade to force their products into new markets. This has led to at least a 5% increase in cigarette deaths

https://www.theguardian.com/commentisfree/2017/jul/17/big-tobacco-trade-deals-new-markets-bat

Cigarette packets often carry the warning to “protect children: don’t make them breathe your smoke”. In 2014, the Kenyan government attempted to do just that – banning the sale of single cigarettes, banning smoking in vehicles with a child and keeping the tobacco industry out of initiatives aimed at children and young people.

But as the Guardian reported last week, British American Tobacco, in an effort to keep Kenyans breathing their smoke, fought the regulations on the grounds that they “constitute an unjustifiable barrier to international trade”.

In fact, big tobacco has a long history of using trade and investment rules to force their products on markets in the global south and attack laws and threaten lawmakers that attempt to control tobacco use.

Back in the 1980s, as cigarette consumption fell off in North America and western Europe, US trade officials worked aggressively to grant American companies access to markets in Asia, demanding not only the right to sell their products, but also the right to advertise, sponsor sports events and run free promotions. Smoking rates surged.

In the 1990s, World Trade Organisation agreements led to a liberalisation of the international tobacco trade, with countries reducing import tariffs on tobacco products. The impact, according to a joint study of the World Health Organisation and the World Bank, was a 5% increase in global cigarette consumption and accompanying mortality rates.

Big tobacco’s lawyers were quick to discover the value of “next generation” trade agreements. In the 1990s, Canada dropped a plain packaging initiative after US manufacturers threatened a suit using the first next-gen trade deal, the North American Free Trade Agreement (Nafta). A few years later, Philip Morris threatened Canada again after it prohibited terms such as “light” and “mild” cigarettes. Philip Morris argued it would be owed millions in compensation for damage to its brand identity.

Philip Morris was able to credibly wield this threat because of the extraordinary powers that Nafta grants international corporations: the right to sue governments in private tribunals over regulations that affect their profits.

A toxic combination of far-reaching and poorly defined “rights” for investors, eye-watering legal costs, and tribunals composed of corporate lawyers with the power to set limitless awards against governments makes investment arbitration and the modern “trade” agreement a formidable weapon to intimidate regulators.

And what big tobacco learned in the global north it has been replicating in the global south, where threats carry greater force against poorer countries that may lack the resources to see down a legal challenge.

In 2010, Philip Morris launched a $25m claim against Uruguay after it introduced graphic warnings on cigarette packs. Though Uruguay successfully defended the measure, it still faced millions in legal costs. And Philip Morris effectively won, as Costa Rica and Paraguay held off introducing similar measures.

Such are the fears around big tobacco’s aggressive use of trade and investment rules that the US-negotiated Trans-Pacific Partnership trade deal featured a carve-out excluding big tobacco from investment protections – an explicit admission of the problem.

But this does not go far enough. The important thing to realise is that the problem goes beyond big tobacco. Big oil, big pharma and big mining follow the same playbook, launching investment arbitration cases to defend their business models from governments that would regulate to protect public health, the local environment or the climate.

Rather than target individual companies or sectors, we must push our governments to reform trade and investment rules that grant such extraordinary powers to corporations. That means removing special investor rights and investment courts from trade agreements. It means removing limits on the freedom of governments to protect public health, labour and human rights and the environment.

Of course, this is easier said than done. Robert Lighthizer, US trade representative, served as deputy in a Reagan administration that pressured countries to open their tobacco markets to US exporters in the 1980s.

Vice-President Mike Pence’s record includes opposing smoking regulation, taking huge campaign donations from big tobacco, and denying the causal link between smoking and lung cancer. The EU commission, meanwhile, has been criticized for its meetings with big tobacco while it was negotiating EU-US trade talks.

The good news is that from Brazil to India to Ecuador, countries are stepping away from outdated trade and investment rules. In the UK, the Labour party manifesto opposes parallel courts for multinationals and proposes to review the UK’s investment treaties.

But until we scrap the powers that we grant big tobacco and others to frustrate and bypass our laws, efforts around the world to protect public health will continue to go up in smoke.

Big investors warn against tobacco investment on World No Tobacco Day, but smoking in Europe is still stubbornly high

Today marks the passing of the 30th World No Tobacco Day, designed to encourage smokers to abstain for a day in the hope that they might quit.

http://www.cityam.com/265672/big-investors-warn-against-tobacco-investment-world-no

Yet it seems the annual event is doing little to help people kick the habit, despite support from big investors such as Axa and Calpers who are using the day to encourage a reduction in tobacco investment.

According to a survey of EU citizens, published by the European Commission to coincide with World No Tobacco Day, there has been no decrease in the number of daily smokers since 2014 – and even an increase among 15- to 24-year-olds.

“The increase in youth smoking rates illustrates the urgency for member states to enforce the provisions of the Tobacco Products Directive, which forbid attractive cigarettes aimed at enticing young people,” said EU commissioner for health and food safety Vytenis Andriukaitis.

The directive, which came into force in May this year, forbids tobacco manufacturers from marketing products as flavoured and requires them to cover 65 per cent of the packaging in health warnings.

Yet the overall smoking rate in the EU has remained at 26 per cent since 2014 and has risen from 25 per cent to 29 per cent in people aged 15 to 24.

Smoking in the UK sits fairly well below the European average, with 17 per cent of the population taking a daily puff.

Greece, Bulgaria, France and Croatia all rank highly, with smoking rates in each country above 35 per cent. Yet in Sweden, only seven per cent of people will regularly smoke a tobacco product.

Axa, Calpers, Scor and AMP Capital are putting their weight behind the push to quit, sponsoring the world’s first global investor statement on the subject.

It aims to “make visible the strong support within the financial community” for the World Health Organisation’s (WHO) framework on tobacco control and encourage stakeholders to act against tobacco investment, Axa said.

Axa and AMP Capital divested from tobacco last year, while Calpers did so 17 years ago and has since widened its ban to include externally managed funds.

The substance kills more than seven million people each year according to WHO, which has coordinated World Tobacco Day since the first event in 1988, and costs households and taxpayers more than $1.4trn (£1.1trn) in healthcare expenditure and lost productivity.

Tobacco Taxation in the European Union: An Overview

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Industry involvement in EU tobacco tracking system divides stakeholders

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