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October 16th, 2015:

Oxford Economics (OE) study on illicit tobacco trade

Unreliability of the study

IF there’s anything to learn from the latest Oxford Economics (OE) study on illicit tobacco trade released recently in Hong Kong to a selective group of mediamen, it is its unreliability as a reference for taxation as it drew a sharp retort from no less than Internal Revenue Commissioner Kim S. Jacinto-Henares.

Henares branded as biased and inaccurate the study that the government lost last year more than P22 billion in revenues due to rampant consumption of untaxed cigarettes.

She cited a World Bank study which showed that only 5 percent, not 19 percent as claimed by OE, of the total cigarette consumption yearly was sourced from the illicit cigarette trade.

Henares said the study made by OE is biased, because it was commissioned by a big cigarette producer who strongly opposed the passage of the “sin” tax law.

Although the revenue chief did not elaborate to avoid being dragged into a trade war between the multinational company and its small competitor, Mighty Corp., which the former has been repeatedly suspecting of engaging in trade malpractices to increase its market share and profits.

What prompted Henares to react quickly was that this is not the first time that OE came out with such an unreliable study, especially at a time when revenue collections from the sin-tax law tremendously increased over the past few months and in the previous years, and, thus, debunked advocates of illicit trade.

There were three other highly questionable studies and reports on illicit trade that were also discredited not only by Henares but by the World Bank, World Health Organization (WHO) and the South East Asia Tobacco Control Alliance, equally reliable authorities on tobacco taxation and illicit trade.

One, is the AC Nielsen Report, which “estimates” illicit cigarettes using a questionable survey method. To date, nobody, except the multinational company, has seen an actual copy of the study. No government agency has been furnished with one, as well.

Two, is the Asia-11 Illicit Tobacco Indicator that you can throw away after reading the disclaimer that says:

“ITIC [International Tax and Investment Center] and OE prepared the report in accordance with specific terms of reference agreed between Philip Morris Asia Ltd., an affiliate of Philip Morris International Inc. [PMI] and ITIC. PMI has provided financial support for the report. However, ITIC and OE assume all responsibility for the report’s analysis, findings and conclusions.

“The report is to serve as a public policy resource pursuant to ITIC’s mission. Nevertheless, should any party choose to rely on the report, they do so at their own risk. ITIC and OE will not accept any responsibility or liability to any claim in respect of the report.”

Three, is the Senate Tax Study-Research Office report that was obviously twisted by the PR guys of the multinational firm to its favor. The report itself offers the recommendations that the data therein is inconclusive and subject to further analysis whether there are taxes and duties leakages.

The Southeast Asia Tobacco Control Alliance also found out that:

· The report failed to mention that, even according to its own results, the majority of countries (six out of 11) compared over time experienced a decline in the volume of illicit trade.
· Nowhere in the report is it mentioned that for the majority of countries (four out of seven) where the share of illicit consumption in total consumption of cigarettes increased between 2012 and 2013, there was no tax increase in 2013. Such result might have undermined the notion that tax increases drive increases in illicit trade, a key message of the report.
Finally, the report is full of errors and mistakes, which is rather surprising given the “commercial” quality and glossy graphical presentation 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: prevalence is the proportion of a population that smokes, while incidence measures how many people per year begin to smoke.

It also confuses “sales” and “consumption,” two fundamental concepts on which the calculations are based. In short, as was true for the prior Asia-11 Report, the reliance on potentially biased data, combined with the lack of transparency about methods employed, results in a study whose estimates are of questionable value. We would caution any stakeholders against relying on this report when assessing the trade in illicit cigarettes in their country or in the region.

Mighty’s rival should be reminded that it is violating not only laws made by Congress (Republic Act [RA] 9211 and its interagency committee, implementing regulations and RA 7394 on unfair competition and deception), memoranda between government agencies and Article 5.3 of the WHO-Framework Convention on Tobacco Control (WHO-FCTC).

The country is a signatory to this government noninterference convention in 2004.

In essence, the WHO-FCTC recognizes that tobacco industry interference poses the single greatest threat to tobacco control. It has been documented that the big ones (multinational) in the tobacco industry have used self-serving strategies to subvert, hinder and prevent tobacco-control efforts at the start of the illicit trade campaign.

To reach the writer, e-mail

Prevent the Renormalizing of Smoking

Electronic cigarettes have been all over the news as of late, with supporters of the devices continuing to insist they’re a fundamental good. Evidence suggests that when used carefully and for the purpose for which they were (supposedly) intended, it is possible for an electronic cigarette to make it easier for a smoker to cut down or quit.

Critics on the other hand see the subject quite differently, insisting that the devices have already been responsible for luring an innumerable army of teenagers and children right into the arms of full-blown nicotine addiction. The general consensus among experts is that that long-term health risks associated with e-cigarette are less severe than those of tobacco, but they try in any way to convey the message that ‘vaping’ is safe is wholly irresponsible.

Just like cigarettes, the liquid used in electronic smoking cessation tools contains nicotine. One of the most addictive substances known to mankind, nicotine has an array of detrimental effects on the body that are inflicted regardless of how the stuff is inhaled. It is a powerful stimulant that gets to work on the body’s central nervous system, it causes blood pressure to spike and also puts additional strain on the heart.

Vaping may cut out some of the chemicals and toxins tobacco contains – other harmful elements remain present, which in some cases are even stronger in concentration.

Now, this wouldn’t be the end of the world if e-cigarettes were responsibly marketed toward and used by a proactive adult audience only. Quite to the contrary however, what we’ve instead been bombarded with is an endless array of brightly colored packages with cute and cuddly graphics, the kinds of celebrity endorsements guaranteed to sway the impressionable and a range of flavors that never fail to make the mouths of preteens water. From bubblegum to candy-floss to gummy bear and more, it’s pretty impossible to deny the direct and thus dangerous appeal such sweet vaping liquids have in the eyes of youngsters.

The only realistic solution to what’s already an epidemic is for the FDA to step in and intensify its efforts to better control and restrict access to both the devices themselves and their respective liquids. As it stands, 38 states have made it illegal to supply minors with such product, but the fact that there are still so many states to follow suits is quite frankly astonishing. And even in states where the ban has been enforced, it’s proving ridiculous easy for kids to pick up liquid refills and electronic devices from pretty much anywhere.

Stopping kids from accessing the devices is only one stage of the solution – the other is to stop making the damn things look cool, elegant, sophisticated and downright delicious. They’re none of the above – they’re dangerously addictive habit-formers that technically serve no positive purpose at all, other than for those already facing an expensive and deadly nicotine addiction.

How can we keep letting the e-cigarette giants get way with duping the nation into once again thinking there’s no harm in smoking?

LETTER: Smoke and mirrors

DURING the Second World War, the Nazis murdered 10-million people. Those who resisted the Nazis were called partisans and freedom fighters. Tobacco products kill 6-million people per year.

Those who oppose this industry are labelled “nicotine nazis” by the manufacturers and its apologists. They have a perverted set of values.

In his latest column (Nicotine nazis hate one thing: pleasure, October 14), Leon Louw shows his warped understanding of addiction, tobacco control organisations and the history of the tobacco industry. He makes many false and weird assertions.

His rants against the National Council Against Smoking are baseless and do not merit a response.

His suggestion that the industry can help smokers find “freedom and dignity” is uninformed.

Since the 1960s, cigarette manufacturers have tried unsuccessfully to rally smokers to their cause by establishing and secretly funding “smoker’s rights groups”. They failed miserably because the overwhelming majority of smokers regret having started and wish to stop.

Most people smoke not because they want to but because they cannot easily stop. Addiction research shows that few people smoke for pleasure, and the main reason for continuing is to allay withdrawal symptoms.

Smokers crave nicotine not for pleasure, but to ward off irritation, anxiety, restlessness, depression, headaches, constipation and a host of other woes.

Moreover, far from seeing smokers as allies, the industry fears them. After decades of lying to its customers about the dangers of smoking, and manipulating nicotine levels to keep them addicted, the industry is now haunted by the spectre of litigation.

It has paid billions to those harmed by its products and is afraid it will have to pay much, much more.

Mr Louw preaches freedom but what he seeks is freedom to harm, not freedom from harm.

Dr Yussuf Saloojee

National Council Against Smoking

Can E-Cigarettes Save Lives?

Joe Nocera

Two weeks ago, I received an email from NJOY, a company that sells electronic cigarettes. Its purpose was to introduce the Daily, a new product that NJOY described as “a superior e-cigarette scientifically developed to deliver quick-and-strong nicotine satisfaction at levels close to an actual cigarette.”

One reason many adult smokers haven’t switched to e-cigarettes is that most e-cigarettes don’t provide the same nicotine kick as a real cigarette. With some 42 million American adults still smoking, and 480,000 of them dying each year as a result, this is tragic. Though nicotine is addictive, it is the tobacco that kills.

An e-cigarette that could truly replicate the experience of smoking would dramatically reduce — not eliminate, but reduce — the dangers of smoking. NJOY claims that the Daily comes closer to that experience than anything on the market. When I spoke to Paul Sturman, NJOY’s chief executive, he emphasized not only the nicotine aspect, but also the Daily’s “feel,” and “the intensity of the hit to the back of the throat.” Sturman added that the company’s target market is adult smokers who have tried, but rejected, e-cigarettes. He thinks it’s a huge market.

As Sturman was describing the Daily, I thought to myself, “The tobacco-control community is going to hate this thing.” Most anti-tobacco advocates view replicating the feel and satisfaction of a cigarette as an effort to “renormalize smoking.” And though some believe that smokers should be encouraged to move to e-cigarettes, most refuse even to acknowledge the health benefits of “vaping” over smoking.

Indeed, thanks to this vociferous opposition, an increasing number of Americans view vaping as no safer than smoking, which is absurd. And e-cigarette manufacturers like NJOY can’t set them straight: The law giving the Food and Drug Administration regulatory authority over tobacco products, which passed in 2009, prohibits e-cigarette companies from making reduced-harm claims unless they jump through some near-impossible hoops. Thus, NJOY has no way to convey to adult smokers the critical message that e-cigarettes could save their lives.

The undisputed leader of the tobacco-control community is Matt Myers, who helped found and is the president of the Campaign for Tobacco-Free Kids. Unlike many of his anti-tobacco peers, Myers is on the record as saying that if “responsibly marketed and properly regulated, e-cigarettes could benefit the public health.” But, like many others, he also fears that e-cigarettes may hook a new generation of children on nicotine, and could lead them to start smoking. And in truth, those fears get far more prominence in the Campaign for Tobacco-Free Kids’ various statements about e-cigarettes than its cautious support for them under the right circumstances.

One thing that particularly bothers Myers about e-cigarette companies is their advertising, which he believes employs the same tactics Big Tobacco once used to hook youths on cigarettes. But when I noted that NJOY can’t market the Daily as a reduced-risk product, thanks to the 2009 law — and thus had to find less straightforward ways to induce smokers to try the product — Myers told me that I should blame the F.D.A., which, six years in, has yet to impose a single regulation on e-cigarettes. “I think the F.D.A. deserves to be pilloried,” he said.

He may be right about that. On the other hand, it’s hardly news that government agencies take forever to get things done — and meanwhile, nearly half a million smokers continue to die each year. It seems to me that if the tobacco-control community wants to start saving lives by employing the reduced-harm strategy that e-cigarettes offer, it needs to forget about the F.D.A. and take matters into its own hands.

That means engaging with companies like NJOY that profess to be trying to do the right thing. Instead of demonizing them, the tobacco control community needs to find common ground, and come up with a set of standards — for marketing, manufacturing, and keeping e-cigarettes away from kids — that both sides can agree to. If such a deal were put in place, perhaps with state attorneys general to oversee it, anti-tobacco advocates could talk about the reduced harm potential of e-cigarettes with a clear conscience, without the involvement of the federal government. They then could describe the benefits of e-cigarettes for smokers that the companies themselves can’t.

It’s happened before. Two decades ago, seeing a once-in-a-lifetime opportunity to impose real restrictions on Big Tobacco, Myers engaged in negotiations that included the states’ attorneys general — and Steve Parrish, then a Philip Morris executive. It was an act of tremendous courage — Myers was pilloried when his involvement was revealed — but without his willingness to look the enemy straight in the eye, Big Tobacco would never have been brought to heel.

I believe the time has come for Myers to screw up his courage again. It could be the beginning of the end for one of the greatest scourges on earth

71 tonnes of illicit loose leaf tobacco worth $40 million seized

Some of the 71 tonnes of illicit tobacco seized by Australian customs officials in June. Photo: Paul Bibby

Some of the 71 tonnes of illicit tobacco seized by Australian customs officials in June. Photo: Paul Bibby

It was, as one observer remarked wryly, “a lot of smokes” – 88 million in fact.

In the largest operation of its kind in Australian history, customs officers have intercepted 71 tonnes of loose leaf tobacco being smuggled into Australia from Indonesia.

The haul has a black market value of $40 million and would have cost Australia more than $27 million in lost tax revenue had it hit the streets.

The seizure was the result of an operation involving co-operation between Australian and Indonesian investigators that had led to 47 tonnes of the illicit product being seized in two containers in Sydney in June, the Minister for Immigration and Border Protection, Peter Dutton, said on Friday.

A third shipment of 24 tonnes was then seized by Indonesian authorities before it could be smuggled into Australia.

Seventy-one tonnes is the equivalent of 88 million cigarettes or 3.5 million packets.

“This tobacco would have cost Australia over $27 million in legitimate tax revenue if it had been successfully smuggled into the country and sold here,” Mr Dutton said.

“There are clear links to organised crime and we know that groups smuggling illicit tobacco into Australia are also involved in other illegal activities such as narcotics.”

He said a new strike force of 16 dedicated officers would be set up to target crime syndicates smuggling illicit tobacco into the country.