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SEATCA rejects tobacco research findings

The Southeast Asia Tobacco Control Alliance (SEATCA) has stamped “Failed” a new tobacco industry research funded by a giant cigarette firm on illicit trade in 14 Asian countries, including the Philippines.

Failed: A Critique of the ITIC/OE Asia-14 Illicit Tobacco Indicator 2013 (full text), see:
Last year, a giant tobacco firm funded a second research on illicit trade of tobacco products in Asia, called “Asia-14 Illicit Tobacco Indicator” which was carried out jointly by a Washington based group, International Tax and Investment Center (ITIC) and a UK group, Oxford Economics (OE).

“It is no surprise that the findings of this research, like its predecessor (Asia-11 Illicit Tobacco Indicator 2012), are pro-tobacco industry, SEATCA said.

The Asia-14 Report claimed that the 341.2% excise tax increase (2.72 to 12 pesos) in the Philippines last January 1, 2013 was the main driver of the alleged large volume increase in Illicit Consumption at 198% or 18.1% of Total Consumption.

An alleged 89.8% of Illicit Consumption and 16.3% of Total Consumption in 2013 was attributed to Domestic Illicit Consumption which was estimated to have grown to 11 billion cigarettes based on the Asia-14 Report.

However, like its predecessor (Asia-11 Illicit Tobacco Indicator 2012), the research findings are biased to an international tobacco company, SEATCA said.

In conjunction with the recent World No Tobacco Day, SEATCA pointed out in their critique that the Asia-14 Report failed to highlight significantly higher tax revenues after the 2013 excise tax increase; for tobacco excise alone, the government collected P70.4 billion, higher by 113.7% compared to 2012. Excise revenue gains were therefore 454% higher than the Asia-14 Report’s estimated excise tax losses in 2013. In effect, SEATCA’s critique disproves allegations that the Bureau of Internal Revenue (BIR) is losing revenues through illicit tobacco trade. BIR Commissioner Kim Henares earlier said the overwhelming growth in sin tax collection was an indication of the inconclusiveness of the Asia-14 report alleging the fast-rising illegal cigarette trade in the country.

According to the main reviewer of the research, Prof. Hana Ross, Principal Research Officer of the Economics of Tobacco Control Project at the University of Cape Town, “The Asia-14 report fails to provide scientifically sound and unbiased information to policy makers and other tobacco market stakeholders.

“The reason for this is simple. The figures and statistics it reports are products of either incorrect or unverified/unverifiable estimation methods applied to often questionable data from multiple sources that do not blend,” Ross said, adding “that the quality of the original data collection is questionable due to the lack of representativeness and possibly intended bias. Many secondary data come from sources with an obvious conflict of interest.”

“More seriously, the report is full of errors and mistakes, which is surprising given the ‘commercial’ quality of the results. For example, the report does not make any distinction between smoking incidence and smoking prevalence, even though these are two very different concepts. It also confuses ‘sales’ and ‘consumption,’ two fundamental concepts on which the calculations are based.” She emphasized that: “While illicit tobacco trade is a problem that requires government attention, it is often blown out of proportion and out of context by the tobacco industry in order to discourage governments from increasing tobacco taxes and implementing other regulatory measures.” Dr. Ulysses Dorotheo, SEATCA’s FCTC program director, said: “Governments should reject partnerships and non-binding agreements with the tobacco industry to solve illicit trade. Instead, governments should secure the supply chain in accordance with measures contained in the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products, which was adopted in 2012 by the 180 Parties to the WHO Framework Convention on Tobacco Control (FCTC).

The new report claims to take advantage of newly available data and improved methodology and covers all 10 ASEAN member nations plus Australia, Hong Kong, Pakistan and Taiwan.

Here are the other major concerns of the failed report:

• Different sources and methods are used across countries, leading to results that are not comparable to one another, yet presented for comparison, without acknowledgement of their distinctions.

• As was pointed out in the SEATCA critique of the Asia-11 report, no rationale is given for including or excluding countries from coverage in this report. The report excludes many of the region’s largest cigarette-consuming countries, such as China, Japan, and South Korea while including Pakistan, geographically an outlier.

• Many methodological approaches are either weak or lack sufficient description that would allow to judge their merits.

• The quality of the original data collection is questionable due to the lack of representativeness and possibly intended bias.

• Many secondary data come from sources with an obvious conflict of interest. Beyond these weaknesses, the Asia-14 report in many cases fails to provide sufficient description of data used to generate the estimates. This lack of transparency makes it difficult, if not impossible, for the report to be fully analyzed or critiqued; it certainly prevents replication of the report’s estimates and other statistics. Even the authors’ self-described attempt to provide more detail in the Annexes of the report falls short of the level of disclosure provided in academic studies and does not permit thorough evaluation. (Jun Ramirez)

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