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March 13th, 2009:

Data Verifies Effectiveness Of Tobacco Tax

Updated on Mar 13, 2009 – SCMP

I refer to Chan Yu-chung’s letter (“Steep tobacco tax rises do not lead to lower rates of smoking”, March 11). His claim summarised in your headline is factually incorrect.

Cigarette price is well-established as a key factor influencing tobacco consumption and smoking prevalence. The World Bank estimated that a 10 per cent price rise reduces demand for cigarettes by about 4 per cent in high-income economies and 8 per cent in others.

In Hong Kong we increased tobacco duty by 300 per cent in 1981, then 100 per cent in 1991. On both occasions smoking prevalence dropped appreciably, from 23.3 per cent in 1982 to 18.7 per cent in 1984, and from 15.7 per cent in 1990 to 14.9 per cent in 1993. The daily average number of smokers calling the Department of Health’s smoking cessation hotline has increased by more than 15 times since the budget announcement on February 25. Our citizens have become more health-conscious and the government’s tobacco control efforts, including taxation, have played a part.

Notwithstanding the overall drop in smoking, its prevalence among women and the young has not shown the same decline. The proportion of 15- to 19-year-olds who smoke has hovered between 2.3 per cent and 4.6 per cent since 1982. The prevalence of smoking among females, having dropped to a low of 2.6 per cent in 1990, climbed back to 4 per cent in 2005. That figure had dropped to 3.6 per cent by 2008, but the drop is proportionally less than the drop in the proportion of smokers in the population from 14 per cent in 2005 to 11.8 per cent last year.

Some 64.8 per cent of smokers started at age 10 to 19, and the number who started smoking below the age of 10 has risen by 21.2 per cent, from 8,500 in 2005 to 10,300 in 2008. Smokers are also smoking more cigarettes every day. The average number puffed by smokers per day increased to 14 (overall), 11 (among female smokers) and 11 (among teenage smokers) in 2008, from 13, 10 and 9 respectively in 2005. This is a cause for concern from a public health point of view.

Increasing tobacco duty is a public health response to these concerns and is part of the government’s multi-pronged approach to tobacco control which also includes publicity, education, legislation, enforcement and cessation. We have made steady progress over the years.

Hong Kong has no reason not to be proud of its success in tobacco control, which means better health for our people and a reduced disease burden for future generations. But there is no reason for complacency.

Thomas Chan, deputy secretary for food and health

Major International Cigarette Smuggling Racket Halted


13 March 2009

The European Anti-Fraud Office (OLAF) announced today that one of the principal suspects in a major international cigarette smuggling investigation has been indicted by the courts in the USA for his part in defrauding European taxpayers of several million EURO in taxes and customs duties.

The indictment in the US brings OLAF a step closer to concluding a six year investigation which has spanned 9 Member States and several countries in Central and South America as well as the USA.

The suspect, who is alleged to have played a pivotal role in shipping illicit cigarettes from Miami to a number of countries in the EU, has been released on bail and is currently under house arrest pending trial.

OLAF-Director General Franz-Hermann Brüner underlined that this is a very complex case which has led to significant losses to the European Community and Member States’ budgets.  Bringing this major fraud to an end has undoubtedly prevented losses of several hundred million EURO to the European taxpayer. He stated that cooperation with U.S. Immigration and Customs Enforcement (ICE) and the Department of Justice could not have been better. “In 1997, the European Commission and Member States signed an Agreement on Cooperation in Customs Matters with the United States of America. This case is an excellent example of the Agreement in operation and demonstrates the commitment of all the parties to the Agreement to work together to combat international organised crime.”

Mr Brüner also emphasised the excellent cooperation that OLAF had received from the authorities in the European countries targeted by the fraudsters. “In particular, I would like to thank the Irish Revenue’s Customs Service for their outstanding cooperation from the outset.

I would also like to thank the Spanish Guardia Civil and the German Customs Investigation Service (ZKA) for the vital role they have played in the investigation. This case is a truly outstanding example of international cooperation”.

A press release of 6 March 2009, issued by the United States Attorney for the Southern District of Florida and the Special Agent in Charge, U.S. Immigration and Customs Enforcement [ICE], Office of Investigations, Miami stated the following (names of principal deleted):



R. Alexander Acosta, United States Attorney for the Southern District of Florida, and Anthony V. Mangione, Special Agent in Charge, U.S. Immigration and Customs Enforcement (ICE), Office of Investigations, announced that [X]. was arraigned on an Indictment returned by a federal grand jury in Miami yesterday, on charges of conspiracy to commit mail fraud and wire fraud in violation of 18 U.S.C. § 1349, mail fraud in violation of 18 U.S.C. § 1341, and smuggling goods out of the United States in violation of 18 U.S.C. § 554.  [X], who had been arrested pursuant to a complaint on February 19, 2009, was released pending trial on bond on February 20, 2009.

According to the Indictment and an affidavit filed with the complaint, the investigation revealed that an organization smuggling cigarettes out of the Port of Miami operated out of Spain, Great Britain, Ireland and Miami, Florida.  [X] ran the Miami portion of the operation.  [X] arranged for the purchase of hundreds of cases of cigarettes from Panama and the transportation of those cigarettes into the Port of Miami.  [X] then arranged for the purchase of other cargo, such as wood flooring and building insulation material, to be used as cover loads to conceal the cigarettes which were re-packed with the cover load material.  Under the direction of [X], false bills of lading were prepared that only declared the cover load material.  These bills of lading were presented to the shipping companies and overseas customs services.  Customs duties and taxes were based on the falsely declared cargo, thus no duties or taxes were paid on the cigarettes. Information contained in the affidavit includes that on two separate occasions, [X] transported approximately 13.3 million cigarettes in shipments, one to Dublin, Ireland and one to Felixstowe, Great Britain.  Based upon the false bills of lading, custom duties and taxes paid on these shipments were approximately, $2,900 and $2,500, respectively.  The true customs duties and taxes that should have been paid on these shipments were $2.1 million each.

Mr. Acosta thanked Immigration and Customs Enforcement, Office of Investigations, and the European Anti-Fraud Office based in Brussels, Belgium for their joint outstanding work on this case.  Extensive assistance was provided by law enforcement agencies from Ireland, Great Britain, Germany and Spain as well as the U.S. Department of Justice, Organized Crime and Racketeering Section, Criminal Division.  The case is being prosecuted by Assistant U.S. Attorney Cynthia Stone.