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March, 2017:

AAP, public health organizations call for FDA ban of all flavored tobacco products

Five health care organizations have urged the FDA to prohibit all candy- and fruit-flavored tobacco products, including e-cigarettes, cigars and hookah tobacco, asserting that these products are undermining national efforts to reduce youth tobacco use and placing children at health risks from tobacco use and nicotine addiction.

http://www.healio.com/pediatrics/school-health/news/online/%7Baf2b3993-2fb7-48e8-afee-325363abd6d4%7D/aap-public-health-organizations-call-for-fda-ban-of-all-flavored-tobacco-products

The joint report released by the AAP, American Lung Association, the American Heart Association, the American Cancer Society’s Cancer Action Network and Campaign for Tobacco-Free Kids also criticized recent legislation introduced in Congress that could limit FDA oversight of e-cigarettes and cigars, as well as the growing market of flavored products.

“Despite the FDA’s ban on flavored cigarettes, the overall market for flavored tobacco products is growing. Continuing a long tradition of designing products that appeal explicitly to new users, tobacco companies in recent years have significantly stepped up the introduction and marketing of flavored other tobacco products — OTPs — particularly e-cigarettes and cigars, as well as smokeless tobacco and hookah,” the organizations wrote. “Although tobacco companies claim to be responding to adult tobacco users’ demand for variety, flavored tobacco products play a key role in enticing new users, particularly kids, to a lifetime of addiction.”

The report highlights data from the 2013-2014 Population Assessment of Tobacco and Health (PATH) demonstrating the prevalence of flavored OTP use in youth demographics.

According to this study, two-thirds of children who currently use tobacco products claim enticing flavors, including gummy bear, cotton candy, peanut butter cup and cookies ‘n cream, as their reason for use.

Additionally, 80.8% of children aged between 12 and 17 years who have ever used a tobacco product began using with flavored products.

In May 2016, the FDA issued a deeming rule in which its authority on tobacco products would stretch to include all previously unregulated OTPs, including e-cigarettes, cigars and water pipes. This rule included several additional provisions, including refusal of sale to those under 18 in the U.S., vending machine sales in adult-only facilities, required addiction and health warnings, and disclosure of ingredients.

The deeming rule also allows the FDA to control the contents of tobacco products and forbids introducing OTPs without FDA review and additional scientific support of public health benefits. However, the White House Office of Management and Budget deleted a suggested provision that prohibited characterizing flavors.

E-cigarette use involves inhaling nicotine, a solvent (such as glycerin) and other additives. Although there are limited studies on the long-term effects of their use, studies have revealed that toxins such as formaldehyde, acrolein, toluene, tobacco-specific nitrosamines, and metals like lead and nickel are found in their make-up.

OTP use can lead to cancer of the oral cavity, larynx, esophagus and lung; aortic aneurysms; COPD; and increased risk of poisoning due to varying levels of nicotine. The effects of inhaling the flavoring in these products is unknown, according to the 2016 Surgeon General’s report.

“Congress must reject any proposals to weaken FDA oversight of these products. In fact, the FDA should strengthen its new rule by prohibiting all flavored tobacco products, including menthol products,” the organizations wrote. “As the FDA itself has demonstrated and as this report documents, there is more than sufficient scientific evidence to support such a prohibition. Eliminating all flavored tobacco products is a critical step in preventing tobacco companies from addicting another generation of kids and reversing our nation’s progress in the fight against tobacco.” — by Katherine Bortz

Cigarette tax to rise 100 per cent

The tax on cigarettes is expected to be hiked 100 per cent this year as part of a selective tax agreement agreed last year by the Gulf Cooperation Council (GCC) to raise the price of goods deemed unhealthy, the Times of Oman said.

http://www.tobaccojournal.com/Cigarette_tax_to_rise_100_per_cent.54154.0.html

Cigarettes, alcohol and unspecified other unhealthy products have been targeted by the Finance Ministry for the tax increase this year, the Times said. The rationale for the stiff duties is that use of unhealthy products raises healthcare costs for governments, the newspaper said.

The 2016 selective tax agreement by GCC member states Bahrain, Kuwait, Saudia Arabia, Qatar, Oman and the United Arab Emirates calls for comparable duties on products deemed harmful to human health and the environment. For example a 100 per cent tax was approved for tobacco products and high energy drinks sold in member countries, while soft drinks face a 50 per cent tax.

FDA delays ‘other use’ rule for tobacco-derived products

The Food and Drug Administration (FDA) pushed back by one year a rule to clarify when products derived from tobacco face regulation as drugs or combination products.

http://www.tobaccojournal.com/FDA_delays_other_use_rule_for_tobacco-derived_products.54153.0.html

Initially set to take effect in February, the FDA first delayed implementation by one month and now intends for it to take effect on 19 March 2018. An additional comment period will expire on 19 May 2017. Additional information is available at: https://goo.gl/BrQooq

PMI to convert Greek cigarette plant to make iQOS sticks

Philip Morris International (PMI) will invest EUR 300 million (USD 323 million) to convert a Greek cigarette factory to into a plant capable of turning out 20 billion tobacco sticks for its iQOS heat-not-burn device, the company said.

http://www.tobaccojournal.com/PMI_to_convert_Greek_cigarette_plant_to_make_iQOS_sticks.54155.0.html

Expansion and remodeling the Aspropyrgos plant operated by affiliate company Papastratos will create 400 new jobs in addition to the 800 current ones, PMI said. Construction will begin immediately with operations expected to start in January 2018.

“This investment is further evidence of our progress towards a smoke-free future. We are encouraged by the 1.4 million smokers who have already switched to IQOS around the world, and we expect this momentum to continue,” said Frederic de Wilde, PMI regional president for the European Union.

Aspropyrgos will be the third facility dedicated to iQOS production. Production currently is centred in a specially built facility in Crespellano, Italy and a small scale Industrial Development Centre in Neuchatel, Switzerland.

Organised crime syndicates smuggling ‘low risk’ tobacco leaf and cigarettes into Australia

ORGANISED crime syndicates trafficking drugs like ice and cocaine are now smuggling tobacco leaf and cigarettes and funnelling the cash back to terrorist groups.

http://www.geelongadvertiser.com.au/news/national/organised-crime-syndicates-smuggling-low-risk-tobacco-leaf-and-cigarettes-into-australia/news-story/81507f303ce6c7005b0f764afc10fe9b?nk=4a17044c8404afede5aa34fab4c90734-1490219416

With government taxes on tobacco set to rise again in May’s federal Budget, black market tobacco leaf and cigarettes are now as profitable as narcotics.

And such is the “low risk high return” market, Federal law enforcement now have credible evidence monies from tobacco trafficking are supporting terrorist groups in the Middle East.

Lead national crime fighting agency Australian Border Force intelligence has flagged a noticeable shift in the pattern of trafficking of tobacco which is rising exponentially, in ordinary postal mail alone by 10 to 15 per cent every year.

According to figures obtained by News Corp Australia, in January last year 3.6 million sticks of cigarettes and 435kg of loose leaf tobacco was intercepted at the nation’s main foreign parcel receiving facility in Sydney through which 75 per cent of all mail nationally passes through.

But this January, the latest monthly figure available, 5 million sticks and more than 1 tonne of loose leaf was intercepted.

Last year’s record average was 150 tonnes of loose leaf and 40 million sticks seized but this year that’s expected to be significantly eclipsed.

The difference has been the emergence of serious organised crime groups as opposed to opportunists taking over the trade almost in entirety.

“It’s all about the money,” one frontline ABF officer involved in the fight said.

“Those who were sending drugs are now involved, because the profit is there. We will recognise the mail coming through as being from the same criminal syndicate … over the last 12 months with tobacco we are actually seeing the exporters using the methodologies we would normally see with drugs.”

Such is the profit margin, ABF recently seized a teddy bear with just four packets of cigarettes sewn into it, a considerable effort for just $60 profit but in multiple individual teddy parcels it could be considerable.

Most of the illicit cigarettes, some of which ends up on the shelves of legitimate corner shops, is from South Korea, Japan, China and Hong Kong while loose leaf is mostly from Indonesia and the Middle East.

Some of it is manufactured legally but with the intention to import it specifically to Australia (evidenced in their plain packaging) to avoid duties or to fuel the black market with foreign markings and brands.

While the trafficking alone is a concern so to are its national security implications.

It has been learnt Australia’s multiagency counter terrorism agents, including the ABF, Australian Federal Police and ASIO, have been warned by overseas counterparts notably both US and French authorities and Interpol that the tobacco smuggling industry was being taken over by terrorist networks.

Specifically suspects linked to Lashkar-e-Taiba and the Taliban in Pakistan, Hezbollah in Lebanon and elements linked with al-Qaeda in the Islamic Maghred (AQIM) in North Africa, Islamic State (ISIS) and even Colombian militant group FARC who traditionally have been involved almost exclusively just in cocaine production.

Australian authorities have intelligence of targets here believed to be in the tobacco smuggling trade and sympathetic and or indirectly linked to the Islamic extremist cause of both Hezbollah and ISIS.

Authorities have conceded the thresholds that have to be established for a prosecution with proof of knowledge and proof of origin are substantial and hard to make, not helped by suspected corrupt import brokers and freight handlers.

Earlier this month, the Australian Criminal Intelligence Commission (ACIC) told a parliamentary joint committee inquiry into illicit tobacco it was a “low risk high reward” trafficking industry and as such high-end criminals were using profits to fund into other criminal enterprises.

This included those with jihadist terror links, although sensitivities around element prompted a request for the evidence to be heard behind closed doors.

There was evidence just one successful import out of 20 attempts from the Middle East was all that was needed to turn a profit.

In 2015, the ABF recognised the rise in tobacco smuggling and the potential loss to government in tax revenue and created a dedicated strike team.

The level of illegal trafficking attempts is expected to rise significantly with a 12.5 per cent increase in excise and customs duties to come in this September under the Federal Government’s May budget, to make the average cost of a packet of cigarettes the most expensive in the world at up to $40 a packet.

Calls to stub out tobacco deals

http://www.thestandard.com.hk/section-news.php?id=180992

Several legislators yesterday called on the government not to extend further concessions to the tobacco trade that is trying to further delay implementation of bigger graphic health warnings on cigarettes to the detriment of public health.

The government proposed in May 2015 to enlarge the size of health warnings to cover at least 85 percent of the packet or retail containers of cigarettes, saying the existing six graphic health warnings which cover half of packets or containers have been in use since 2007.

The Food and Health Bureau has made four concessions to meet the industry’s concerns, including using any background color to show nicotine and tar content and for the English version of the health warning to remain at 50 percent of the surface area of the lid of a drum-shaped container.

Undersecretary for Food and Health Sophia Chan Siu-chee told a Legislative Council health services panel yesterday that the government will also extend the adaptation period from six months to 12 months upon gazetting of the amendment order of the smoking ordinance.

Tourism-sector lawmaker Yiu Si- wing said: “The government is conceding, giving in to the tobacco sector’s pressure.”

The Labour Party’s Fernando Cheung Chiu-hung: “Public health should come first. Especially as I have had some personal health problems, I understand the value of health.

“I understand from the grassroots that smoking is a relief for them from stress but the government should not concede anymore. It has already conceded enough.”

Peter Shiu Ka-fai, of the wholesale and retail sector, questioned whether the government would have evidence to show that bigger warnings would mean “people will stop smoking?”

Wong Ting-kwong, of the import and export sector, said he is a smoker and that bigger warnings will still affect second- and third-hand smokers as “the smoke isn’t less.”

The panel also discussed the Hong Kong Code, a voluntary code aimed at protecting breastfeeding and to impose restrictions on formula milk marketing practices that give misconceptions about the nutritional value of products for children up to 36 months old.

Chan told the legislators: “We consulted the Department of Justice and the code is not breaching the competition law as this is voluntary.”

Stamps mandated for tobacco products

The Tax Authoritiy (AT) has introduced a “control” stamp on tobacco products and plans the same for alcohol to reduce revenue loss from illicit trade, the AIM news agency reported.

http://www.tobaccojournal.com/Stamps_mandated_for_tobacco_products.54149.0.html

All imported and domestically manufactured products must bear the stamp to be sold legally, said AIM, the Agência de Informação de Moçambique. Amelia Nakhare, AT chairperson, said the new stamp would have a significant impact on government revenue and the country’s fiscal organisation, AIM said. She reportedly announced the new stamp during a visit to the British American Tobacco factory in Maputo, where cigarettes bearing the new seal were being manufactured.

Tobacco Control Program

Context

Tobacco use, and its negative health, social and economic impacts, is a significant global health challenge.

http://www.worldbank.org/en/topic/health/brief/tobacco

According to the 2015 World Health Organization (WHO) Report on the Global Tobacco Epidemic, in 2013, 21% of adults globally were current smokers – 950 million men and 177 million women. Despite increasing global population between 2007 and 2013, smoking prevalence has actually declined worldwide from 23% in 2007, preventing an increase in the number of smokers in the world. The total remains at 1.1 billion smokers globally in 2013.

Tobacco use is a leading global disease risk factor and underlying cause of ill health, preventable death, and disability. It is estimated to kill more than 5 million people each year across the globe. If current trends persist, tobacco will kill more than 8 million people worldwide each year by 2030, with 80% of these premature deaths taking place in the developing world.

In 2015, the “Addis Ababa Action Agenda” adopted at the Third International Conference on Financing for Development held in Addis Ababa, Ethiopia — and later endorsed by the United Nations as part of the Sustainable Development Goals (SDGs) — recognized that public policies and mobilization, and effective use of domestic resources, underscored by the principle of national ownership, are central to the common pursuit of sustainable development, including achieving the SDGs.

Clause 32 of the Addis Ababa Action Agenda states that price and tax measures on tobacco are viewed as an effective and important means to reduce tobacco consumption and health care costs, and represent a revenue stream for financing for development in many countries.

The Action Agenda also stresses that the tobacco tax agenda is fully consistent with obligations acquired by 180 countries that are parties to the WHO Framework Convention on Tobacco Control (FCTC) (an additional seven countries have signed the FCTC but have not ratified it, and only nine countries are neither signatories or parties to the FCTC).

World Bank Group Tobacco Control Program

The World Bank Group’s Tobacco Control Program assists selected countries in fostering and implementing tobacco tax reforms to achieve public health goals by reducing tobacco affordability and consumption, and controlling illicit trade on tobacco. Work is currently underway or being initiated in the Philippines, Indonesia, Senegal, Colombia, Botswana, Ethiopia, Armenia, Georgia, Liberia, and Lesotho; work in Ghana concluded. Initial discussions are taking place Ukraine, Nigeria, Moldova, China, India, Peru, and Tajikistan. In addition, the program aims to support knowledge exchange, including peer-to-peer advice and support, among selected countries on the economics of tobacco control (for example, through the Joint Learning Network, which includes more than 30 countries). The preparation of a Tobacco Taxation Module as part of WBG/IMF Tax Policy Assessment Framework (TPAF) is underway as part of a new WBG/IMF initiative launched ahead of the Financing for Development Conference in Addis Ababa, held in July 2015, to help member countries strengthen their tax systems. One of the pillars of the initiative includes the development of “improved diagnostic tools to help member countries evaluate and strengthen their tax policies.” Building on their collective expertise, the Bretton Woods Institutions (BWIs) aim to play a fuller role in enabling all of their member countries to assess tax policy performance in order to identify priority tax policy reforms, and design the requisite support for their implementation. The TPAF is a diagnostic framework to provide systematic and structured assessment of a country’s tax policy system, and to develop options for improving such system given a set of policy objectives.

More specifically, the program assists government agencies in developing capacity to assess the health and social costs of tobacco use, and design, enact, administer and monitor tobacco taxation policies. Enhanced capacity will enable countries to increase prices and reduce tobacco use, taking into account the macro-economic and fiscal situation of each country, tax laws, and existing tax administration structure and processes. This process includes assessments and discussions related to fiscal revenues and allocation; smoking patterns and taxes at country level; and socio-economic and health impacts of increasing tobacco tax rates, under different tax policy scenarios, and including impacts on employment, smuggling and other likely impacts of tobacco tax reforms.

The Bank team engaged in this program is multi-sectoral, and includes experts in health, governance, and macro-economics and financial management. Initial discussions are being held to mobilize knowledge and expertise from the International Monetary Fund’s Fiscal Affairs team. The Bank team is also working closely with other international partners, such as the World Health Organization and the Campaign for Tobacco-Free Kids.

The Bank’s Tobacco Control Program is implemented through a multi-donor trust fund financed by the Bill & Melinda Gates Foundation and the Bloomberg Philanthropies. These donors take part in governance of the trust fund and participate in the selection of priority countries included for support under the program.

Joint Learning Network Module: The Joint Learning Network (JLN), connects practitioners and policymakers across countries, facilitating peer-to-peer learning and sharing of knowledge and experience. As part of the Bank’s program, the network is currently developing a Tobacco Tax and Illicit Trade on Tobacco Module targeting member countries in Asia, Africa, Latin American and the Caribbean, and Europe, as well as a diverse group of international, regional, and local partners. The module is expected to focus on tobacco taxation, tax administration, and illicit trade control measures.

In 1991 the World Bank adopted a mandatory operational policy not to lend, invest in, or guarantee investments or loans for tobacco production, processing, or marketing. The Bank’s activities in the health sector discourage the use of tobacco products.

Why the emphasis on tobacco taxation?

Raising taxes on tobacco products is one of the most cost-effective measures to reduce consumption of products that increase mortality , while also generating substantial domestic revenue for health and other essential programs—investments that benefit the entire population. Given this, the World Bank Group Tobacco Control Program gives priority attention to tobacco taxation.

Findings in the 2015 WHO Report on the Global Tobacco Epidemic show that while only 33 countries impose taxes that constitute more than 75% of the retail price of a pack of cigarettes—the taxation level recommended to have an impact on consumption —most countries that do tax tobacco products have extremely low tax rates. And some countries do not have a special tax on tobacco products at all.

Given this situation, the World Bank Group’s program supports governments to look at accumulated country evidence and use tax measures to increase the retail price of tobacco products as one of the best available public health policy measures.

Some important lessons from international experience about how to effectively implement tobacco taxation policy to achieve public health objectives can be adopted and adapted in policy dialogue and operational support to countries. Such lessons include:

While nearly all countries tax tobacco products, an excise tax is the most important type of tobacco tax, since it applies uniquely to tobacco products and raises prices relative to prices for other goods and services.

Simpler tobacco tax structures are more effective than complex ones, since tiered tax structures are difficult to administer and can undermine the health and revenue impacts of tobacco excise taxes.

Use of specific excise taxes enhances the impact of tobacco taxation on public health by reducing price gaps between premium and lower-priced alternatives, which limits opportunities for users to switch to less-expensive brands in response to tax increases. Taxing all tobacco products comparably reduces incentives for substitution.

Ad valorem taxes are difficult to implement and weaken tax policy impact. Since they are levied as a percentage of price, companies have greater opportunities to avoid higher taxes and preserve or grow the size of their market by manufacturing and selling lower-priced brands. This also makes government tax revenues more dependent on industry pricing strategies and increases the uncertainty of the tobacco tax revenue stream.

Specific excise taxes need to be adjusted for inflation to remain effective.

Tax increases should reduce the affordability of tobacco products. In many countries, where incomes and purchasing power are growing rapidly, large price increases are required to offset growth in real incomes.

Strong tax administration is critical to minimize tax avoidance and tax evasion, to ensure that tobacco tax increases lead to higher tobacco product prices and tax revenues, as well as reductions in tobacco use and its negative health consequences.

Regional agreements on tobacco taxation can be effective in reducing cross-border tax and price differentials and in minimizing opportunities for individual tax avoidance and larger scale illicit trade.

For more information, please contact:

Patricio V. Marquez

Lead Public Health Specialist

World Bank Group Health, Population and Nutrition Global Practice

Email address: pmarquez@worldbank.org

Blanca Moreno-Dodson

Lead Economist

World Bank Group Macro Economics and Fiscal Management Global Practice

bmorenododson@worldbank.org

Treasury consults on tax treatment of heated tobacco products

The Treasury is consulting on the tax treatment of heated tobacco products, which are being promoted as a new innovation in the tobacco market. In these products processed tobacco is heated (but not burned like conventional tobacco) to produce, or flavour vapour. Heated tobacco is not a separate category in its own right in current legislation, so a consultation on their tax treatment aims to help maintain the integrity of the duty system going forward.

The consultation scope does not include e-cigarettes, which do not contain tobacco.

The consultation closes on 12 June 2017.

AMP snuffs out tobacco investment

http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=11821645

AMP Capital is to snuff out its investment in tobacco manufacturing companies including millions of dollars invested through its KiwiSaver funds.

The move is part of a decision to pull out of tobacco investments worth A$440 million across its global investment portfolio.

The asset manager will also pull its Australian investments out of cluster munitions, landmines, biological and chemical weapons companies.

The move follows on from its New Zealand arm which pulled out of these investments last year following reports by the New Zealand Herald and Radio New Zealand which highlighted KiwiSaver’s exposure to the controversial sectors.

AMP Capital chief executive Adam Tindall said it had excluded tobacco manufacturers under a new environmental, social and governance and socially responsible framework because their products were highly addictive, could not be consumed safely and impacted non users via second-hand smoke.

He said cluster munitions, landmines, biological and chemical weapons manufacturers were excluded because their products indiscriminately kill through normal use (including during peace time) and their use leaves a legacy of significant and specific danger for civilians.

“We are not prepared to deliver investment returns to customers at any cost to society.

This position has been affirmed through consultation with major institutional clients and engagement with retail customers.”

Divestment from the tobacco investments would occur progressively over 2017 the company said, with impacted investors notified prior to any changes being made.

“The managers of impacted portfolios will be instructed to progressively sell down their holdings of excluded securities in a reasonable manner. This may take up to 12 months from time of formal notification,” a spokeswoman said.

Last year the Herald identified AMP Capital’s KiwiSaver funds had $17,169,091 invested in tobacco companies in the year to March 31, 2015.

It also has investment funds outside of KiwiSaver which are likely to include tobacco investments.

The AMP spokeswoman said it was not giving a regional breakdown for its tobacco investment.