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July, 2014:

ITIC-OE study on PH illicit cigarette trade, unreliable – AER

Action for Economic Reforms (AER) refutes the claim of the International Tax and Investment Center (ITIC) and Oxford Economics (OE) that nearly P16 billion was lost in illicit cigarette trade in the Philippines, mainly causing the drop in legal domestic sales of cigarettes in 2013.

The said ITIC-OE study entitled “Asia-11 Illicit Tobacco Indicator 2013 Update for the Philippines” estimated that illicit consumption of cigarettes in the country increased from 5.9% of total consumption in 2012 to 18.1% in 2013. Moreover, it claims that the total consumption of smokers was only down by 3% after a year of implementing the Sin Tax Reform Act of 2012.

Yet AER argues that the study is a case of conflict of interest. ITIC is a research firm that claims to be independent even while Philip Morris International’s Vice President for Fiscal Affairs and International Trade (Mr. Huub Savelkouls) actually sits in the Board of Directors, along with other global tobacco industry representatives.

AER recalls that at the height of the sin tax debate in Congress in October 2012, ITIC organized the Ninth Asia-Pacific Tax Forum in Manila and used the occasion to criticize the government’s proposed reforms, including the cigarette tax increase. In the experiences of other countries such as Australia and the UK, using alleged threat of smuggling has been among the strategies of tobacco companies to oppose tobacco tax reforms.

Significantly, said AER Coordinator Filomeno Sta. Ana, the ITIC-OE study suffers from serious methodological problems starting from its data gathering process to analysis.

It employed “empty pack surveys” which, by its very nature, may suffer from selection bias of sources of litters or incorrect deciphering between counterfeits and legal non-domestic products.

Secondly, the study used a formula which assumed values of too many important variables such as other cigarette companies’ declared and actual volume in the market, which, because of BIR’s disclosure information

Although the artificially depressed prices of some cigarette brands are worrisome, AER asserts that they are not sufficient to automatically conclude that the manufacturers of such brands are already engaged in illicit trade.

“Not only Mighty but also PMFTC’s Jackpot as well as other variants have more or less the same artificially low prices,” said Sta. Ana. At present, PMFTC’s low-end brands sell at around P1.25/stick when Mighty cigarettes typically sells at P1.50/stick. AER sees this price war as an unsustainable strategy to gain market share especially with the application of a unitary tax scheme by 2017.

Lastly, AER also emphasizes that aside from doubling excise tax collections, the Sin Tax Law greatly reduced cigarette consumption. Far from the 3-percent estimate of ITIC, smokers from Angono, Rizal and Cotabato City reduced smoking by 14.3% and 22.9%, respectively, according to AER-DOH surveys in 2013.

More recently, the 2014 Social Weather Stations survey on cigarette consumption revealed a drop in smoking prevalence, particularly among the young and the poor.

Despite the questionable nature of the Asia-11 report, AER supports the Bureau of Internal Revenue (BIR)’s effort to pursue an investigation on illicit trade. AER also lauds the latest measure of having stamps on cigarette packs to distinguish the paid packs from the illicit ones.

Action for Economic Reforms (AER) is an independent policy think-tank and a core member of the civil society coalition that pushed for the passage of the Sin Tax Law in 2012.

WHO FCTC article 5.3: promise but little progress

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Promoting cessation resources through cigarette package warning labels: a longitudinal survey with adult smokers in Canada, Australia and Mexico



Health warning labels (HWLs) on tobacco packaging can be used to provide smoking cessation information, but the impact of this information is not well understood.


Online consumer panels of adult smokers from Canada, Australia and Mexico were surveyed in September 2012, January 2013 and May 2013; replenishment was used to maintain sample sizes of 1000 participants in each country at each wave. Country-stratified logistic Generalised Estimating Equation (GEE) models were estimated to assess correlates of citing HWLs as a source of information on quitlines and cessation websites. GEE models also regressed having called the quitline, and having visited a cessation website, on awareness of these resources because of HWLs.


At baseline, citing HWLs as a source of information about quitlines was highest in Canada, followed by Australia and Mexico (33%, 19% and 16%, respectively). Significant increases over time were only evident in Australia and Mexico. In all countries, citing HWLs as a source of quitline information was significantly associated with self-report of having called a quitline. At baseline, citing HWLs as a source of information about cessation websites was higher in Canada than in Australia (14% and 6%, respectively; Mexico was excluded because HWLs do not include website information), but no significant changes over time were found for either country. Citing HWLs as a source of information about cessation websites was significantly associated with having visited a website in both Canada and Australia.


HWLs are an important source of cessation information.

Tobacco Tax – Taxing virtue and the poor, promoting illicit trade, promoting tax evasion

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Tax sovereignty and feasibility of international regulations for tobacco tax policies

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Standardised packaging of tobacco products in Australia

Early evidence about the predicted unintended consequences of standardised packaging of tobacco products in Australia: a cross-sectional study of the place of purchase, regular brands and use of illicit tobacco



To test for early evidence whether, following the standardisation of tobacco packaging, smokers in Australia were—as predicted by the tobacco industry—less likely to purchase from small mixed business retailers, more likely to purchase cheap brands imported from Asia and more likely to use illicit tobacco.

Design Serial cross-sectional population telephone surveys in November 2011 (a year prior to implementation), 2012 (during roll-out) and 2013 (a year after implementation).

Setting/participants Smokers aged 18 years and over identified in an annual population survey in the Australian state of Victoria (2011: n=754; 2012: n=590; 2013: n=601).

Main outcome measures

Changes between 2011 and 2013 in: proportions of current smokers who purchased their last cigarette from discount outlets such as supermarkets compared with small mixed business retail outlets; prevalence of regular use of low-cost brands imported from Asia and use of unbranded tobacco.


The proportion of smokers purchasing from supermarkets did not increase between 2011 (65.4%) and 2013 (65.7%; p=0.98), and the percentage purchasing from small mixed business outlets did not decline (2011: 9.2%; 2012: 11.2%; p=0.32). The prevalence of low-cost Asian brands was low and did not increase between 2011 (1.1%) and 2013 (0.9%; p=0.98). The proportion reporting current use of unbranded illicit tobacco was 2.3% in 2011 and 1.9% in 2013 (p=0.46). In 2013, 2.6% of cigarette smokers reported having purchased one or more packets of cigarettes in non-compliant packaging in the past 3 months; 1.7% had purchased one or more packets from an informal seller in the past year.


One year after implementation, this study found no evidence of the major unintended consequences concerning loss of smoker patrons from small retail outlets, flooding of the market by cheap Asian brands and use of illicit tobacco predicted by opponents of plain packaging in Australia.

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Tobacco industry-funded research on standardised packaging: there are none so blind as those who will not see!

Support for standardised packaging of tobacco products seems to be reaching a tipping point. Australia has already adopted this measure. In New Zealand, legislation is in progress. Ireland and England have now committed to implementing standardised packs while many other countries, including Canada, Norway and Turkey are actively considering them.

The tobacco industry, which has invested vast sums in the design of packs that appeal to new smokers, especially adolescents, is worried and, just as it did when bans on smoking in public places were being considered, is engaged in a wide-ranging and well-funded campaign to undermine the evidence.1 Laverty and colleagues warned about this, describing one such example using Australian data. They showed how the design of the study was such that it would have been virtually impossible to detect a significant effect.2 However, as we will now show, this was not an isolated incident.

Their warning would seem to be justified by a working paper published on the website of the Department of Economics of the University of Zürich, entitled ‘The (Possible) Effect of Plain Packaging on the Smoking Prevalence of Minors in Australia: A Trend Analysis’,3 funded by Philip Morris International. Its authors also conclude that there is no evidence that standardised packaging works and Philip Morris has press released it,4 generating headlines such as ‘Plain packs derided as not working’5 and ‘New data proves plain pack cigarettes doesn’t dissuade young smokers’.6 However, as we shall show, once again, it was almost inevitable that the data and methods used would fail to detect any expected effect.

The study looks at the ‘prevalence of smoking among Australians aged 14–17 years’, taking monthly prevalence …

Enhanced corticobulbar excitability in chronic smokers during visual exposure to cigarette smoking cues



Neuroimaging studies of chronic smokers report altered activity of several neural regions involved in the processing of rewarding outcomes. Neuroanatomical evidence suggests that these regions are directly connected to the tongue muscle through the corticobulbar pathways. Accordingly, we examined whether corticobulbar excitability might be considered a somatic marker for nicotine craving.


We compared motor-evoked potential (MEP) amplitudes recorded from the tongue and the extensor carpi radialis (control muscle) of chronic smokers under drug withdrawal and intake conditions as well as a nonsmoker group. All participants were tested during passive exposure to pictures showing a smoking cue or a meaningless stimulus. In the intake condition, chronic smokers were asked to smoke a real cigarette (CSn: group 1) or a placebo (CSp: group 2).


Results show that MEP amplitudes recorded from the tongues of participants in the CSn and CSp groups under the withdrawal condition were selectively enhanced during exposure to a smoking cue. However, this effect on tongue MEP amplitudes disappeared in the intake condition for both the CSn and CSp groups.


Limitations include the fact that the study was conducted in 2 different laboratories, the small sample size, the absence of data on chronic smoker craving strength and the different tastes of the real and placebo cigarettes.


These results suggest that, in chronic smokers, tongue muscle MEP amplitudes are sensitive to neural processes active under the physiological status of nicotine craving. This finding implicates a possible functional link between neural excitability of the corticobulbar pathway and the reward system in chronic smokers.


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Challenging times for big tobacco

Andrew Rosser

Billboard from Mataram- author’s own

Indonesia’s major tobacco companies—Sampoerna, Gudang Garam, Djarum and Bentoel—face challenging times as new policies on tobacco control come into effect this year. Under the New Order, the Indonesian government did very little to control the production, marketing, sale and use of tobacco. As a result, these companies have for decades rated among the country’s largest and most profitable. But during the era of democratic reform, Indonesia’s tobacco control lobby—the most prominent members of which are the National Commission for Tobacco Control, the Indonesian Consumers Association, the Jakarta Citizens’ Forum, the Indonesian Heart Foundation, and the Indonesian Cancer Foundation—has grown stronger. It has sought to bring Indonesia in line with international standards when it comes to regulating tobacco. The industry now knows that it has a fight on its hands. Consequently, companies are engaging significant financial and political resources in order to prevent further regulatory restrictions that might compromise their bottom line.

New controls on big tobacco

In early May, Sampoerna announced that its net revenue growth had fallen sharply over the previous year due to declining sales of hand-rolled cigarettes. In a press statement, company President Paul Janelle said that he remained ‘optimistic’ about the future, noting that profit growth was strong. But he also said that 2014 would be ‘full of challenges’ because of greater competition and the implementation of new tobacco control policies. A few days later, the company announced that it would shut two hand-rolled cigarette plants in East Java and lay off almost 5000 workers. Sampoerna’s difficulties may be nothing more than a blip caused by changing consumer preferences away from hand-rolled to machine-produced cigarettes. However, Janelle’s reference to regulatory changes indicates that other factors are working against it as well.

In late May, media outlet reported comments by a stock market analyst that investors were ‘becoming reluctant to bet their money on tobacco stocks’ because tougher tobacco control measures were ‘expected to hamper the growth of the tobacco industry’. If this is the case, it suggests that big tobacco is in for a more challenging time, not just in terms of selling its products, but also raising capital to finance its operations.

Since the fall of the New Order, consecutive governments have continued to encourage tobacco production. At the same time, however, they have gradually tightened restrictions on the marketing, sales and use of tobacco products as calls have grown for stronger measures to address the country’s tobacco epidemic. According to the most recent figures, in Indonesia 67 per cent of men and four per cent of women use tobacco, with devastating effects for the nation’s health and productivity.

Among the main policy changes have been a ban on cigarette advertising in the electronic media (except between the hours of 9.30pm and 5.00am); the identification of tobacco as an addictive substance in the 2009 Health Law; the establishment of ‘smoke free areas’; requirements for tobacco companies to include pictorial health warnings in cigarette advertising and on cigarette packets; and restrictions on tobacco company sponsorship of music concerts and sporting events. The latter include bans on the use of company or product logos and brands (including brand images) in sponsorship material and tobacco company sponsorship of events covered by the media. The government has also introduced a new regional cigarette tax of 10 per cent. Some of these changes are still being implemented. For instance, the regional cigarette tax only came into effect earlier this year. The requirement for pictorial warnings only came into effect on 24 June 2014.

Tobacco control advocates argue that the government’s tobacco control policies remain weak by international standards. In particular, they note that the government has refused to ratify the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC). Government tobacco control policy consequently does not include at least two key protections common in many other countries: (i) a comprehensive ban on tobacco advertising, promotion and sponsorship and (ii) restrictions on the sale of individual cigarettes. The latter is necessary to limit tobacco companies’ ability to sell their products to children and the poor.

The structural power of big tobacco

The operating environment for the tobacco companies has clearly changed, as Janelle’s comments indicate. Gone are the days when almost no controls were imposed on big tobacco. Despite this more challenging environment, it would be a mistake to underplay big tobacco’s future prospects. These companies continue to hold enormous economic power and political influence in post-authoritarian Indonesia and are consequently well positioned to resist the efforts of the tobacco control lobby. Tobacco companies are major investors, employers and taxpayers, giving them considerable structural economic power, particularly in relation to the government’s budget. Tobacco taxes accounted for between 4.8 and 7.7 per cent of the Indonesian government’s total annual revenues between 1998 and 2010, according to the Tobacco Control Support Centre.

Tobacco companies are also very well-connected. Laksmiati Hanafiah, the former General Chairperson of the Indonesian Heart Foundation and one of Indonesia’s leading tobacco control advocates, claims that tobacco companies have been a key source of campaign finance for all presidents since Habibie. At the same time, they are well-organised through a series of industry associations, the most prominent of which is the Indonesian Cigarette Manufacturers’ Association (GAPPRI). Finally, they have the ability to mobilise popular forces—most notably tobacco farmers—to support their cause, engage in public protests and more generally act as the public face of the tobacco industry, giving their cause popular legitimacy.

Tobacco companies have considerable resources at their disposal to fight the introduction of further tobacco controls and water down existing ones. Tobacco control advocates have successfully used the court system to combat previous tobacco industry efforts in this regard. In 2011, for instance, they defeated an attempt by a group of tobacco farmers to challenge legal recognition of tobacco as an addictive substance. But they lack big tobacco’s economic power, political connections, organisational capacity and ability to mobilise popular forces.

Health Minister Nafsiah Mboi, a strong proponent of tobacco control, recently warned tobacco companies to make sure they include pictorial warnings on cigarette packaging before the June deadline, apparently concerned that they are dragging their feet on this reform. She also criticised House of Representatives speaker, Marzuki Ali, for lobbying President Yudhoyono against ratifying the FCTC because parliament was still in the process of discussing a tobacco bill. Nafsiah, clearly exasperated, told the media that, “[l]awmakers were voted in by the public to represent and protect the people, it is very sad that the House Speaker chooses to side with the tobacco industry instead of his constituents.” Such outbursts from the Health Minister illustrate the ongoing struggle for tobacco control, even where the required regulations are already in place.

A new government, a new approach?

The upcoming election of a new president in July is unlikely to change the balance of power between the tobacco companies and tobacco control advocates. Neither of the two presidential candidates—Joko Widodo and Prabowo Subianto—smokes. But Widodo’s party, the Indonesian Democratic Party of Struggle (PDIP), relies on support in key tobacco-growing areas such as Central and East Java, while Prabowo Subianto has sought to woo tobacco farmers through his leadership of the Indonesian Farmers’ Association (HKTI). Neither candidate has declared a clear policy position on the issue of tobacco control during the election campaign so far. However, for both individuals, there is a political logic to moving slowly in this area.

Big tobacco is entering more challenging times in Indonesia. But the industry is likely to remain a powerful economic and political force for the foreseeable future, given both its lobbying capacity and politicians’ willingness to engage industry support for their own political needs. This will doubtless be to the detriment of the health of millions of Indonesians.

Andrew Rosser ( is associate professor of development studies and an Australian Research Council Future Fellow at Adelaide University.