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February 18th, 2015:

Smoke’s up: Is doubling tobacco tax a wise move?

Ahead of this year’s budget speech on February 25, the Hong Kong Council on Smoking and Health has called on the Legislative Council for tobacco tax to be doubled in a bid to deter people from smoking. This would see the average price of a packet of cigarettes rise from $55 to a whopping $93, something that would be in line with countries like the UK. It’s certainly close to the average price of a packet in Australia, which is around $94. The proposed hike seems to be simply aimed at putting smokers off the habit by hitting them where it always hurts the most – right in the pocket. EDIT: On February 25 2015, a 20% per stick increase on cigarettes was announced as part of the 2015-16 Hong Kong Government Budget with immediate effect. As a result, the average retail price pack increased from an average of $50 to approximately $54.

Just over one in 10 of us smoke in Hong Kong – 10.7 percent to be precise. It even brought together Shawn Yue and Miriam Yeung in 2010 rom-com Love in a Puff. When compared to other developed countries, this figure seems low. The smoking prevalence rate in Australia, for instance, is 13.3 percent, versus 17.8 percent in the USA and, higher still, 19 percent in the UK. But, nevertheless, some of the powers that be reckon it’s still worth tackling here due to the health risks to that 10.7 percent alone. And, as the World Health Organisation highlights, ‘increasing the price of tobacco through higher taxes is the single most effective way to encourage tobacco users to quit and prevent children from starting to smoke’.

It comes as no surprise, then, that Hong Kong’s leading anti-tobacco campaigners – which include the Council on Smoking and Health (COSH), the Anti-Cancer Society and the Dental Association – have been ardently lobbying the government for an increase in tax. In an open letter addressed to financial secretary John Tsang at the start of February, local anti-tobacco organisations outlined the loss of more than 7,000 lives annually from smoking-related diseases. That means the taxpayer foots much of the high costs of medical expenses.

A study by COSH, released last month, found that increases in tobacco tax over the past three decades have correlated with drops in daily smoking prevalence. “When [smokers] find that the tobacco price has increased, then they will take action. It has an immediate effect,” says Vienna Lai, the council’s executive director. Lai thinks that if tobacco tax were to be doubled, ‘within one or two years the smoking preference in HK could be lowered down to single digits [under 10 percent]’.

We take to the streets to gauge retailers’ opinions on the proposed tobacco tax increase. “The government keeps increasing the tax anyway,” says Ms Lai, a street vendor in Wan Chai. “It’s no big deal. It doesn’t make much difference. If they already smoke, they’ll keep smoking.” The same scepticism is shown by Ms Ling, a sales assistant at an international chain of convenience stores. She says: “It’ll have an impact on sales but it won’t stop people from smoking.” Helen Chan Ching-han, centre supervisor at the Integrated Centre on Smoking Cessation, disagrees, though. She notes that over the past few decades, tobacco tax increases ‘always motivate smokers to quit and the demand [for services] increases suddenly’. The proposed tax increase, she says, ‘will really affect those with low incomes, as a packet of cigarettes may cost as much as a meal for the family’.

We also ask a handful of smokers how they foresee an increase in tobacco tax affecting their consumption. David Wong, a local 23-year-old, tells us: “I’ll either smoke less or I won’t smoke any more. Cigarettes are really expensive already. For people who smoke, it would have a big effect.” By contrast, though, 32-year-old expat Catherine Davies doesn’t think that the proposed increase in price would be enough for her to stop. “I think it’s good in terms of discouraging people from smoking,” she says. “I won’t cut down, though, because it’s really not that much.”

It all begs the question – just how much would it take to stop Hongkongers from smoking? COSH’s survey found that current smokers, on average, reckon that the price for a packet should be increased to $171 to effectively motivate them to quit, which suggests there’s still a long way for anti-tobacco lobbyists to go.

One issue that raising tobacco tax can’t deal with is the proliferation of illicit cigarettes. Figures show that the majority of illicit cigarettes seized by Customs and Excise are smuggled into Hong Kong from the Mainland and, in 2011, approximately 40 percent of them were counterfeits. In last year’s budget speech, the Financial Secretary announced plans to step up enforcement against this illegal cigarette trade.

China is the world’s largest producer and consumer of tobacco – earning it the appropriate nickname ‘the smoking dragon’. A packet of cigarettes in our closest neighbour costs an average of $17 and there are an estimated 300 million smokers throughout the country. Unsurprisingly, the tobacco industry is a lucrative source of revenue for the Chinese government. COSH works closely with tobacco control associations in China. However, it’s clear that the Chinese attitude to smoking is unlikely to change much in the near future, posing questions over whether a tax hike in our city would simply encourage more illegal trading.

A spokesperson from the Coalition on Tobacco Affairs, which is opposed to an increase in tax, tells us that ‘another steep tobacco tax increase would only fuel the already rampant illicit tobacco trade’. The group cites figures from an Asia-wide study conducted by Oxford Economics, which show that, in 2013, Hong Kong’s illicit cigarette consumption rate stood at more than 30 percent, costing the Government $3.2b in excise tax revenues. The coalition recommends, instead, ‘a long-term policy of moderate and regular excise tax [that] increases in line with inflation and can help to achieve the Government’s tobacco control objectives without driving smokers to the illicit market’. Predictably, anti-tobacco groups dispel these statistics, arguing that they are skewed by doubtful research methods and tobacco companies’ self-interest.

Whether tobacco tax should be frozen or increased is an age-old debate, encompassing all manner of questions. There’s scarcely room to mention allegations of corruption and cronyism, infringement of liberties and other control measures like advertising regulations and expansion of smoke-free areas. Recent speculation by the media, though, casts doubt on an increase in tax this coming year, with news that the Financial Secretary is still assessing the effect of last year’s tax. This is good news for those opposed to new tax hikes, like the Coalition on Tobacco Affairs.

However, Professor Lam Tai-hing, from Hong Kong University’s School of Public Health, asserts that ‘if an increase in tax is not imposed, the government is obviously not taking public health seriously enough’. He emphatically urges the Financial Secretary to ‘increase the amount that the government collects and put it into those services and resources that will incentivise smokers to stop. Use the money to benefit those who have given up and those who are giving up. Please increase tobacco tax’. And so the debate rages on…

The annual tobacco tax rate is announced in the Financial Secretary’s 2015-2016 Budget Speech on February 25. Any alterations are expected to be enacted with immediate effect.

EDIT: On February 25 2015, an immediate 20% per stick increase was announced as part of the 2015-16 Hong Kong Government Budget. As a result, the average retail price pack increased from an average of $50 to approximately $54. (oops, wrong year Ms Foster, it was 2014)