Last updated: April 11, 2010
Hong Kong, China (HK) went for more than eight years without increasing tobacco tax, partly because its thriving economy simply did not need the extra revenue, but undoubtedly also partly due to intensive and persistent lobbying by tobacco interests. When at last a rise was announced last year, it must have come as a nasty shock to the industry—it was 50 per cent (see Hong Kong, China: tax rise at last. Tobacco Control 2009;18:164–5). The big tobacco companies then hiked up the price to counteract the loss of profits from the large decrease in duty-paid sales they knew would result.
Nevertheless, tobacco companies saw a red warning light and in January this year, about a month before the annual budget announcements, a rash of pro-tobacco public relations stunts began to appear in news media. Some could not be traced with certainty, but others were the work of a previously little-noticed foundation called the Lion Rock Institute, whose mission includes supporting ‘libertarian’ free trade and protecting the people of HK from ‘creeping socialism’. Lion Rock, purportedly independent, has acknowledged that it is ‘supported’ by funding from the Atlas Economic Research Foundation of the USA, a free-market think tank which supports country level institutes like Lion Rock in many countries around the world. Atlas has acknowledged substantial tobacco industry funding.
Lion Rock’s case for HK’s finance minister not to put up tax again was expressed in a policy paper entitled, ‘Failed tobacco tax sees hopes go up in smoke’, purportedly based on official data. It was written or at least defended by a member of staff apparently barely out of college, but willing to debate with experts with considerable knowledge of the local tobacco tax situation. It appeared in The Standard, a tobacco-friendly daily newspaper owned by a local tobacco company boss, and on Lion Rock’s website. Its main points were repeatedly regurgitated in various media, including radio appearances. One of these was on an English language radio programme moderated by none other than the young staff person’s boss at Lion Rock. Despite numerous requests, Lion Rock did not respond to requests that it confirm whether tobacco industry funding was taken for the work in question.
Perhaps more serious were the many newspaper articles pegged on Lion Rock’s paper, all of them virtually presenting a certainty that the finance minister could not possibly raise tax again, as last year’s 50 per cent rise had been a disaster in terms of increasing the sales of smuggled cigarettes and denting revenue. Many articles either reported or inferred that duty-paid cigarette sales were up, not down; and some even took a hand in it themselves, no doubt aided by tobacco-friendly public relations nonsense, including concerns that the increasing numbers of smokers forced to buy counterfeit cigarettes may be exposing themselves to even more damage than from legitimate products. One even wrote that laboratory tests showed Chinese counterfeit cigarettes, in addition to higher nicotine and carbon monoxide than brand name cigarettes, ‘contain impurities that include insect eggs and human faeces.’
It must have been obvious from the start to the very people that the report was trying to influence that it was, quite simply, rubbish. The HK government learned some years ago that increased smuggling requires increased enforcement. As a result, there have been significantly more customs officers deployed to tobacco anti-smuggling work, resulting in increased numbers of smuggling cases and arrests—but the quantities being seized have been falling. So the total number of cigarettes seized has not risen since last year, but fallen significantly. In the words of a departmental official, “Evidently, our stringent enforcement has cornered the culprits to scale down their operation.”
In addition, claims that the tax rise had not affected consumption, and that the finance minister must be out of pocket, are the opposite of the truth. After last year’s tax rise, sales of duty paid cigarettes decreased by more than 30 per cent, and a study by the University of Hong Kong showed that the number of young people calling its quit-smoking hotline jumped by 111 per cent after the increase. As for government tobacco excise revenue, that did not fall, but rose, by two per cent. It came as small surprise, though nevertheless as a bitter disappointment to public health organisations, that a strenuous rebuttal of the false claims went largely unreported. Even an open letter to the government by a raft of blue chip names failed to get any mention at all.
The finance minister duly announced no change in tobacco duty, referring to last year’s rise as if it were sufficient to raise tobacco tax only once in a while. However, he did abolish duty free tobacco concessions, and publicly acknowledged that HK tobacco duty accounted for only about 60 per cent of the retail price of cigarettes, rather than the 75 per cent recommended by the World Health Organization. Overall, though, the budget was a significant victory for the tobacco industry. As to the future, even though the finance and excise departments know what nonsense is peddled by the industry, public health advocates must be far from hopeful of significant change in such an apparently tobacco friendly environment.