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June, 2008:

Warrant Issued After Businessman Fails To Appear

Danny Mok – SCMP – Updated on Jun 11, 2008

A former chairman of a tobacco manufacturer is being sought by graft-busters on an arrest warrant after he failed to appear in court for his alleged connection to a HK$50 million cigarette-smuggling case.

Lu Dayong, 60, former chairman of Nanyang Brothers Tobacco Company, had been facing two counts of conspiracy for an agent to accept an advantage and one of conspiracy to defraud.

Lu was earlier granted court bail of HK$3 million in cash. He was required to appear in court yesterday for the resumption of the hearing, which had gone on for 54 days, the Independent Commission Against Corruption said.

District Court Judge Joseph Yau Chi-lap issued a warrant for Lu’s arrest after he failed to turn up.

The commission said people who had information on the whereabouts of Lu or any other information that could lead to his arrest should call its 24-hour hotline, 2526 6366.

Co-defendants Ko Kit, 39, director of Hang Chun Trade Development; and Chan Kai-san, 40, sales manager of the same firm, had their case adjourned to today. One of the bribery charges alleges Lu, Ko and Chan conspired together and with other people for Lu to accept advantages from purchasers of cigarettes from the mainland between March 2003 and February 2004.

The alleged advantages were for Lu to cause Nanyang Brothers to sell Double Happiness cigarettes to Hang Chun so that they could be supplied to the mainland purchasers.

The other conspiracy charge alleges Lu, Ko and Chan conspired to defraud the tobacco company by concealing from the firm that Lu had interests in Hang Chun. The defendants were alleged to have caused the tobacco company to supply Double Happiness cigarettes to Hang Chun, knowing that the cigarettes would be sold on the mainland, violating the contracts between the two firms.

Another suspect in the case, mainlander Lin Jianding, 42, a former director of Hang Chun, is still being been sought by the ICAC.

China’s Smokers Light Up Young

11 June 2008 – SCMP

China admits it has 15 million underage smokers, most of whom started before they turned 13, according to a Health Ministry report that blames advertising, easy access to cigarettes and low prices. China’s three top-selling brands cost less than five yuan a packet, and more than 90 per cent of young smokers surveyed said no stores had ever refused to sell them tobacco, despite a ban on sales to those under 18, AFP reports.

No Buts About Tobacco Ban In Restaurants

Updated on Jun 08, 2008 – SCMP

I read about the dismay of the Wan Chai Business Association about how some members’ bars and restaurants were being forced by the Tobacco Control Office to provide clean air to their staff (“Fuming bar owners to unite after losing smoking exemption”, June 1). I took immediate action to ease their pain.

As a public service and to create a level playing field, I have checked the relevant websites, identified 72 “bars” in Hong Kong that have a smoking exemption – yet hold a general restaurant license. I have requested that Tobacco Control pull their exemption. I even found one smoking nightclub that holds a full restaurant licence.

If Noel Smyth can, with a straight face, point to the licence on the front door of his shop that states boldly that Delaney’s is a restaurant, and then say it is not a restaurant – then he should be doing stand-up comedy.

Annelise Connell, Stanley

End Easy Access To Cigarettes

SCMP – 7th June 2008

I share L. M. S. Valerio’s view that it is “an uphill battle” to get existing smokers to quit their health-destructive habit and more importantly to save future generations from this scourge. (“Tough to curb young smokers”, June 3).

It is clear that the legislation to forbid sales of cigarettes to under-18 minors is not working, with the number of young smokers growing steadily in Hong Kong. The government should curb cigarette manufacturers’ easy access to the marketplace by reducing the huge number of outlets allowed to sell cigarettes.

A drastic reduction in the outlets will make access to cigarettes inconvenient and demand greater effort from smokers, adults and minors to purchase tobacco. Nicotine is a poisonous and cancer-causing substance and its availability should be restricted, not facilitated.

As it is now, cigarettes can be purchased too conveniently from supermarkets, convenience stores, newsstands, neighbourhood stores and restaurants, where cigarettes are always prominently displayed.

That cigarettes are as widely available as a bottle of water, a chocolate bar or a newspaper defies reason. The government has the moral responsibility to protect lives, including addressing the harm done by smoking. We must fight aggressive importers and manufacturers of tobacco products by restricting their access to the marketplace.

Hopefully, this will help curb or even prevent new generations of smokers from emerging.

At the same time, it may also reduce the number of existing smokers and their consumption.

Ang Ah Lay, Causeway Bay

Tobacco Excise Tax Reduction Expected


The Excise Department is planning to reduce base valuation prices used for calculating taxes on cigarettes following complaints from cigarette importers of unfair treatment. The department had previously announced a maximum retail price as a base for calculating excise taxes, which in turn were based on CIF (cost, insurance and freight) prices as declared by importers.

But declines in CIF have led the department to consider revising downward its maximum prices, possibly by around 10 baht per pack, which in turn will lead to a lower overall tax burden for importers.

In addition to excise taxes, the maximum retail price is also used as a base for calculating value-added taxes for goods. The maximum price in practice is often higher than actual retail prices paid by customers.

Chawewan Kongcharoenkikul, a deputy director-general of the Customs Department, noted that under the most favoured nation (MFN) concept of the World Trade Organisation, tariffs must be levied equally for goods imported from various members.

As a result, the maximum retail price method of calculating excise taxes, which is set individually on a brand basis, may not be in keeping with the principles of MFN.

Indeed, cigarette importers have been pushing this argument, citing the fact that cigarettes produced by the government’s Thailand Tobacco Monopoly have excise charges based on ex-factory prices whereas imported cigarettes are taxed based on the maximum retail price concept.

Dr Chawewan said many countries, such as the Philippines, used actual market prices for calculating taxes.

Allowing taxes to fluctuate based on actual market prices rather than an arbitrary figure determined by the state in turn helps foster genuine competition in the market among producers.

From the perspective of the Excise Department, however, using maximum prices ensures that tax revenues are relatively stable when compared with calculating taxes based on actual market prices.

Historically, the right to establish and tax based on maximum retail prices was given to authorities during a period when the Thai economy was dominated by monopoly players with relatively little competition in the market. As a result, maximum prices were seen as actually benefiting consumers by limiting the scope of firms to take advantage of their market dominance through pricing.

But Dr Chawewan acknowledged that the economy today differed significantly from that of past decades, as competition now was relatively free for a wide range of products and services.

”At the end of the day, whether we like it or not, we can’t avoid having to comply with international regulations,” he said.

Dr Chawewan said pressure from policymakers for tax officials to meet revenue targets was one factor influencing the valuation process.

At the same time, valuation is open to interpretation. The concept of GATT value, for instance, a key principle in assessing import tariffs, calls for calculations to be based on transaction value. But proving that a transaction value was valid and included charges such as royalties that should also be included was difficult, Dr Chawewan said.

Japan Tobacco Falls on Higher Cigarette Tax Proposal

Japan Tobacco Falls on Higher Cigarette Tax Proposal (Update2)

By Taku Kato

June 6 (Bloomberg) — Japan Tobacco Inc., the world’s third- largest publicly traded cigarette maker, fell the most in more than four months in Tokyo trading after a minister said the government may consider increasing cigarette taxes.

The stock declined as much as 5.5 percent and was 5.1 percent lower at 488,000 yen as of 1:37 p.m. on Tokyo’s stock exchange, heading for the biggest decline since Jan. 28.

Higher taxes may quicken a decline in cigarette sales in Japan, where the percentage of men who smoke has fallen by half over the past 40 years to about 40 percent because of an increase in health consciousness. Japan Tobacco’s operating income from cigarette sales in the country slid 9.4 percent to 222 billion yen ($2.1 billion) in the 12 months through March.

“Tobacco taxes are a candidate” to make up for revenue shortfalls, Economic and Fiscal Policy Minister Hiroko Ota told reporters in Tokyo today. “We need to first have a discussion on the entire tax system.”

Hidenao Nakagawa, a former secretary-general of the ruling Liberal Democratic Party, wants lawmakers to consider a proposal to triple the retail price of a pack of cigarettes to about 1,000 yen from about 300 yen, the Nikkei newspaper said today.

The government collects 2.2 trillion yen annually from cigarette duties and Nakagawa’s proposal would increase this by 8 trillion yen, the Nikkei said. Nakagawa said raising the tax rate would bring Japan cigarette prices in line with other developed countries, the report said.

Taxes account for 189 yen of the cost of a 300-yen packet.

UK Considers Teen Smoking Crackdown

1st June 2008 –

The British Government is considering banning cigarette machines and forcing manufacturers to sell cigarettes in plain boxes with no branding.

The Department of Health for England and Wales has put out a discussion paper that proposes making cigarette vending machines and packets of 10 cigarettes illegal, to try and target teenage smokers.

It also suggests the introduction of plain packaging for cigarettes, carrying only the product name in standard lettering and without brand colours.

The department also wants to ban point of sale advertising and to force shops to put cigarette boxes beneath shop counters where they cannot be seen.

Tobacco manufacturers oppose the moves saying new laws need to be supported by credible evidence, and need to show they can address the Government’s stated objective of reducing smoking amongst teenagers.

The Role of the Media in Promoting and Reducing Tobacco Use

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