Tobacco companies have opposed a proposal to raise the tax on cigarettes that could see smokers pay Sh7 to the Treasury for every ten shillings spent on their products. The move is aimed at boosting government revenue and aligning Kenya’s taxation regime with international standards. The Institute of Legislative Affairs (ILA) is proposing that the Treasury increase taxes on cigarettes to an effective rate of 70 per cent, the internationally recommended level by the World Health Organisation (WHO).

“Taxes account for 55 per cent of the cigarette prices in Kenya, which is much lower than the WHO recommended threshold of 70 per cent,” said the ILA last week, citing countries like Thailand, at a pre-budget hearing organised by the Institute of Economic Affairs.

British American Tobacco (BAT) Kenya and Mastermind Tobacco opposed the proposal claiming it would increase cigarette smuggling by tax evaders.

“This issue should be looked at in the context of the implications on the entire tobacco industry.

Experience in other countries, Canada being one such example, has shown that such initiatives lead to significant increases in consumer pricing leading to the growth of illicit trade,” said BAT East and Central Africa head of Corporate and Regulatory Affairs, Joe Muganda. “Which is not good for government revenues.”

Mastermind Tobacco spokesman Josh Kirimania, said that the new proposal is discriminatory to the majority of low-income smokers. “It is unfair to charge the same tax for people who are the lower end of the market with those at the top,” said Mr Kirimania.

He said that Mastermind Tobacco is lobbying the Treasury to have a change of heart and go back to the old system that categories products based on their charateristics, arguing this is the norm for other industries – and the tobacco sector ought not to be an exception. Malted beers and spirits are taxed differently in the alcohol industry.

The ILA executive director, Vincent Kimosop, said the proposal is based on a study done on the Sportsman brand, since it is the most popular in the market.
Mr Kimosop said the Treasury would be following the law since the Tobacco Act 2007 allows the Finance minister to increase levies on cigarettes.

“The minister for the time being in charge of Finance shall implement tax policies where appropriate price policies on tobacco and tobacco products so as to contribute to the objectives of this Act,” the law states.

The processes of manufacture, sale and production of tobacco products are regulated by the Act.

To ensure that the effective taxation rate is not reduced, there is a proposal to peg the tax to inflation, which implies that the rate will be adjusted in tandem with the changes in costs of goods.

Mr Kimosop said that inflation had gone up since the amendments to the Finance Bill were made in June, when the Budget was read, and as such the tax rate used then has been eroded by the rise in inflation.

The heat is on to increase Missouri’s relatively low tax on cigarettes and other tobacco products.
On Thursday, Secretary of State Robin Carnahan approved a ballot referendum petition for circulation by the American Cancer Society. Although several draft petitions have already been approved by the secretary of state for possible inclusion on next November’s ballot, cigarette tax increase proponents are trying to hedge their bets in 2012 by circulating multiple proposals.

The latest petition asks voters to support a tax of 3.65 cents per cigarette to fund anti-smoking education programs. The same position would also levy a tax of 25 percent on roll-your-own tobacco and 15 percent on other tobacco products.

Although many Republican leaders in the General Assembly have shunned the idea of increasing any taxes, including on tobacco, supporters of the movement say the additional revenue could help the state during its current budget crisis.

Before any statutory changes can be brought before Missouri voters in November 2012, signatures must be obtained from 5 percent of registered voters in six of the state’s nine congressional districts by May of next year.

California’s wrangle with tobacco taxes is back in a familiar mix that voters have confronted since 1988 – cigarette makers on one side, health advocates on the other. But now there’s a new dimension: The economy. Several tax-increase proposals – including one by the governor to generate $7 billion annually for the shaky state budget – are aimed at the November 2012 ballot. Thus far, none have qualified. Negotiations led by the governor’s office are under way to consolidate them or pare them back, on the assumption that recession-weary voters may not be inclined to approve billions of dollars in multiple packages of new taxes. Already on the ballot is an $11.1 billion borrowing for water projects statewide.

But the first statewide tax hike that voters will consider next year will come five months earlier, in June, when they decide whether to approve a $1-a-pack boost on cigarettes to provide money – perhaps $855 million the first year – for cancer research. If the tax is approved, it will bring the per-pack levy to $1.87, in addition to commensurate increases on other tobacco products. There also would be a distribution tax on inventories of about $2 per pack.
Phillip Morris USA, which played a major role in opposing tobacco taxes in the past in California, is bankrolling virtually the entire opposition campaign, which has thus far collected some $2.6 million, including $2.1 million in four contributions alone since August.

Supporters of the proposed tax, who also figured in the battle over the earlier levies, are led by the American Cancer Society, the American Heart Association, and the American Lung Association. The three groups have accounted for all but one of the campaign’s top 20 donations, reflecting some 90 percent of the total $616,000 collected thus far.
Thirteen years ago, voters approved a 50-cent increase on cigarettes; a decade earlier, in 1988, they approved Proposition 99, a 25-cent hike, and over time a 10 percent increase was set aside for the state’s General Fund and a 2 percent increase provided money for cancer research. Cigarettes and other tobacco products also carry sales, use and excise taxes.

Under the latest proposal, 60 percent of the new money would go to grants for researching cures for tobacco-linked illnesses and 15 percent would be used to build and lease research facilities. Of the remaining 25 percent, 20 percent would go to stop-smoking and prevention programs run by the state Public Health Department and the state Department of Education.

Of the remaining 5 percent, law enforcement would get 3 percent and the balance would go to help administer the program through a new nine-member committee.
For those looking for new money for the beleaguered program, the tobacco tax offers hundreds of millions of new dollars. But there is uncertainty about how much money actually will be raised, in part because the higher the tax traditionally drives a reduction in consumption.

In 2010, California Healthline researchers reported an 8.1 percent drop in cigarette consumption between 2008 and 2009, down to 972 million packs. Twenty years earlier, Californians consumed some 2.5 billion packs.

The state Public Health Department also has reported a sharp drop in tobacco sales to minors since 1995. The number is based on a retailer violation rate of 37 percent in 1995 compared with 5.6 percent rate last year.

And while voters generally have favored taxing cigarettes and other tobacco products, they haven’t favored the kinds of huge increases often sought by anti-tobacco activists. In November 2006, for example, voters handily rejected a $2.60-per-pack tax increase.

Starting today smokers will pay at least MOP 6 more per cigarette pack, as the new tobacco tax duty comes into effect. The tax rise will encourage smokers to quit, the Health Services Bureau (SSM) assured, while vowing to continue increasing the tax in the future. According to the law approved last week, the tobacco tax will increase by MOP 0.5 for each cigarette, in order to be in line with the ban on smoking in public places that comes into effect from January 1. Taxes on tobacco in Macau will be MOP 10, around 38 per cent of the retail price, which is still a far cry from Hong Kong prices, where one pack costs MOP 50, MOP 35 of which are taxes.

For this reason lawmakers and smoking prevention associations said the increase was too low.
The SSM disagrees: “There are several steps to encourage smokers to quit. One of them is to increase the tobacco tax,” they said in a statement.
Other measures include restrictions on the sale of tobacco and a ban on tobacco vending machines. Tobacco brands and producers will also no longer be allowed to advertise, sponsor public events or launch promotional campaigns.
The bureau also pledged to boost its stop-smoking service, as well as to enhance promotional awareness and the enforcement of the anti-smoking law.

Price benefits

The SSM released figures that show that more than 200 persons quit smoking every year after the tobacco tax rise from MOP 1 to MOP 4 was implemented in May 2009. After this increase the number of smokers that ditched tobacco increased from 194 in 2008 to 223 the following year.
In 2010 the number of individuals undergoing the stop-smoking treatment amounted to 421. So far there were 1,272 people who resorted to this service and more than a third (36 per cent) have managed to stay away from tobacco for at least six months in a row.
Most of the people who seek help are men between 50 and 59 years old. Only 12 per cent of the stop-smoking service users are women.
“Most of those who fail to quit do so because they don’t have a strong will to stop smoking. Some smokers are influenced by friends and a small number continue smoking because of stress at work,” the bureau said.
The first stop-smoking service was created in November 2006 at the northern district’s health centre and is currently available in all public health centres.
Media reports showed that vendors increased the tobacco price last week, even before the law was approved. Shopkeepers’ claim sales dropped by one third since the announcement of the increase in tobacco tax.

No rush

“We have received information of some complaints” about tobacco prices, SSM director Lei Chin Ion confirmed to Macau Daily Times. If people notice there are unlawful practices they should report the case to the Economic Services Bureau, he added.
Lawmakers also asked the government to introduce stricter rules for duty-free cigarettes, claiming that people were likely to start buying tobacco in mainland China where it is much cheaper.
Both visitors and locals are allowed to enter Macau with as many as 10 packs of tobacco, while in Hong Kong it’s forbidden to enter with more than 19 cigarettes.
But Lei Chin Ion said so far there was no sign of any rush to buy tobacco in mainland China. “We have kept in touch with Zhuhai authorities and they say no increase in the sale of tobacco products was registered,” he said.
Also starting next month, smoking will be prohibited indoors and in some other public places. Only casinos and bars will enjoy a grace period of one and three years, respectively.

The SSM director was yesterday at the Horta da Mitra market distributing official signs that must be posted in all locations where the ban will be enacted.

Two-thirds of Maryland voters support increasing the state’s tobacco tax, according to a new poll from the Maryland Citizens’ Health Initiative, the group that pushed the dime-a-drink tax on alcohol last General Assembly session. The group says their poll by Opinion Works shows 65 percent endorse the idea of another $1 a pack tax on cigarettes while less than 30 percent oppose it. About 72 percent of Maryland voters like the idea of taxing cigars and smokeless tobacco at the same rate as cigarettes. (The phone poll of more than 800 people was conducted last week.)

The group believes increasing the tax will cut consumption and fund health care programs, especially among youth who have adopted the use of cigars, especially flavored one. As of 2010, 15.2 percent of adults and 14.1 percent of high school students in Maryland were smokers.

The U.S. Centers for Disease Control and Prevention say smoking and secondhand smoke cause 443,000 deaths and $96 billion in related disease annually – or $10.47 per pack consumed if lost productivity is counted. The average price nationally for cigarettes is about $5.58.

“Increasing taxes on cigars and smokeless tobacco is a public health imperative,” said Vincent DeMarco, president of the Maryland Citizens’ Health Initiative, in a statement. “The people of Maryland strongly support this because they know doing so will reduce the use of these deadly products by young people.”

What DeMarco doesn’t have is the support of the leadership in Annapolis. The extra buck would bring the total in taxes to $3, among the highest in the nation. The tax has been raised three times in 1999, mostly recently in 2007.

The tobacco tax will more than double, from MOP 4 to MOP 10, according to a government-proposed draft law recently sent to lawmakers’ approval. Local anti-smoking associations regard the MOP 6 raise as too low, while Hong Kong-based World Health Organisation (WHO) senior policy advisor Judith Mackay says it is still “inadequate”. The secretary for Economy and Finance Francis Tam Pak Yuen had promised to raise the tobacco tax last month at the Legislative Assembly.

The tax will increase by MOP 0.5 for each cigarette, in order to be in line with the ban on smoking in public places that comes into effect from January 1.
In Macau the tobacco tax was last updated in 2009 and is currently set at MOP 0.2 per cigarette or MOP 4 per 20-cigarette pack.
Currently the average price of a cigarette pack is MOP 20, while in Hong Kong it costs up to MOP 50 after a 41.6 percent increase set in June this year.
Local anti-smoking associations and lawmakers were calling for an increase similar to Hong Kong.
“We are very disappointed. We hope that the government will consider matching the tax with Hong Kong because tobacco prices continue to be very cheap in Macau as compared to Hong Kong,” Smoking and Healthy Life Association of Macau director-general Samuel Chan told Macau Daily Times.
Chan does not think the tax increase goal is in line with the new law. He said a bigger raise would be more adequate to protect residents’ health.
“The man is usually the smoker in a family. If he cannot smoke outside, he may start smoking more at home and more second-hand smoke will impact women and children,” he added.
The tobacco tax should be set at 70 percent or more of the retail cost of a packet of cigarettes, according to a goal set by WHO. If the government proposal is passed, the local tobacco tax duty will be only 38 percent of the retail cost, while in Hong Kong it is closer to 70 percent.
The chairman of Hong Kong anti-tobacco pressure group Clear the Air shares Chan’s view. James Middleton said that the increase is “manifestly inadequate”. However he believes that Macau should not follow Hong Kong’s footsteps and look at Singapore instead.

“The retail prices of a packet of 20 cigarettes [Marlboro brand] overseas as of now are: HKD 117 in New York, HKD 94 in Ireland (and increasing next year); HKD 88 in England and increasing in 2012; HKD 85 in Australia (adjusted since they sell in packets of 25) and increasing in 2012; HKD 72 in Singapore for the past four years; and HKD 50 in Hong Kong,” he said.
Middleton urged the Macau Government to set the tax to match Singapore levels. “Adults would still be able to afford it, many would quit and for sure it would put the cost of cigarettes beyond reach of the youth which is the object of excise taxation,” he stressed.
He slammed Macau for having “one of the least effective anti-tobacco laissez-faire attitudes” even though it has the largest casino-betting turnover in the first world.
Thereby Middleton went on to say that the MSAR fails in its duty of caring for the Macau public and youth. “Without replacement smokers [youth] their business is over,” he stressed.

A group of 14 U.S. senators — all Democrats — are using a familiar strategy as they try to raise the federal excise tax on tobacco products. Senate Bill 1403 would provide annual funding to the Individuals with Disabilities Education Act by essentially doubling the excise tax on cigarettes and small cigars. The bill also would create “tax parity” on tobacco products by sharply raising the federal tax on smokeless tobacco so there is little tax difference between smokeless products and cigarettes.

The public-health agenda of the bill comes out in the subtitle of “Saving lives by lowering tobacco use act.”

The approach is similar to one that legislators took when pushing through a law that more than doubled the federal cigarette tax – from 39 cents to $1.01 a pack – to help pay for a $32.8 billion expansion of the State Children’s Health Insurance Program. President Obama signed that bill into law in February 2009. The additional funding was estimated to provide coverage to an additional 4 million children.

The smokeless-tobacco tax issue is pivotal to Reynolds American Inc. in Winston-Salem, which is plowing ahead with its smokeless initiatives as part of what it calls its transformation into becoming a “total tobacco company.”

For example, the federal excise tax for cigarettes would go from $1.006 a pack to $2.01.

The excise tax on smokeless tobacco product also would be raised to the equivalent of $2 a pack, according to Bill Godshall, executive director of SmokeFree Pennsylvania.

The bill would: increase the snuff tax rate from $1.51 to $26.79 a pound; increase the chewing tobacco tax rate from 50.33 cents to $10.72 a pound; and tax dissolvables, snus and other portioned smokeless products at 10 cents apiece.

Some advocates disagree with targeting a tobacco excise-tax increase for the disabilities act, saying most tobacco taxes have been geared toward recouping the cost to society of health-care expenses related to its use.

John Dinan, an associate professor of political science at Wake Forest University, said he doesn’t expect the Senate bill, or a House version, to move forward this year.

“Tax increases are likely to face a particularly uphill battle,” Dinan said.

Analysts hope the bill could further stimulate the debate about the role smokeless-tobacco products can play in reducing overall cigarette demand.

One set of anti-tobacco advocates say smokeless tobacco is a gateway for teenagers to cigarettes and discourages users from quitting as they find fewer public places where they can legally smoke. The Campaign for Tobacco-Free Kids says “all products must be taxed at equivalent rates” to keep users from switching.

Bonnie Herzog, an analyst with Wells Fargo Securities LLC, said in an Aug. 15 report that of the about 1 million adults who quit smoking each year, about 50 percent either begin or continue to use smokeless-tobacco products.

Another set of advocates argue that smokeless tobacco, while still not safe for users, is significantly less harmful than smoking, primarily because it does not involve burning tobacco.

“There are many of us with public-health backgrounds who believe that all tobacco, nicotine and other alternative products should be taxed based on their risks and relative risks,” said Scott Ballin, past chairman of the Coalition on Smoking or Health.

“This type of incentive to manufacturers could help move users of the most hazardous form of nicotine delivery — the cigarette — to other tobacco, nicotine and alternative products that are scientifically established to be 90 percent lower in risk than cigarettes.”

Whatever tax increases Congress approves for tobacco products is likely to be mirrored by states with already high tobacco taxes, said Kathleen Dachille, director of the Center for Tobacco Regulation at the University of Maryland School of Law.

“There’s the potential that by raising the smokeless-tobacco tax, you could lead smokers to stick with cigarettes rather than potentially less-harmful alternatives because the alternatives are just as costly,” Dachille said.

“That’s one of many reasons why we need more clarity from the FDA on how harmful are smokeless-tobacco products compared with cigarettes so to present a better cost-benefit analysis in terms of public health and in terms of product cost.”

The number of cigarettes holidaymakers may bring back from Europe without attracting questions from Customs officials is to be cut by more than two-thirds as part of a Treasury attempt to claw back some of the £2.2bn in tax lost to tobacco smuggling every year. The proposed change, which sets a guideline limit of 800 cigarettes and 1kg of rolling tobacco, will reignite a battle with campaigners such as smokers’ rights group Forest.

Simon Clark, director of Forest, described the move as “shocking”, noting that current limits of up to 3,200 cigarettes and 3kg of rolling tobacco were set in 2002 after an attempt to clamp down further met with outrage and legal challenges.

Treasury minister Justine Greening is to set out plans to slash existing guideline limits, bringing them in line with Ireland and many other parts of Europe. “It doesn’t actually change the rules,” she said. “People who are holidaymakers or travellers from the UK, who maybe want to bring back some cigarettes when they come home for personal use, they are not affected at all. But we do believe this will do is start to deter those people who are actually just using minimum indicative levels as a way of bringing in wholesale amounts of cigarettes.”

“The levels people [will still be able to] bring in are more than enough for their own personal use — that is not something we would, or should, challenge.”

This claim was immediately challenged by Clark said: “The Labour government was forced to increase the limit from 800 to 3,200 because there was chaos at airports and ports around the country, with goods and vehicles being seized all over the place. We have absolutely been there with the 800 guideline. It didn’t work.”

Under European law, smokers bringing in tobacco merely have to convince Customs officials it is for personal use. Official guidance, however, sets the level at which suspicion is cast on personal imports.

In 2002, when then chancellor Gordon Brown sought to impose a maximum guideline of 800 cigarettes, an opposition campaign won enthusiastic support from sections of the media. The Sun newspaper claimed it had been victorious when the level was increased to 3,200 after a series of stunts including sending its own bus, full of page three girls, to head a protest convoy of cross border shoppers to Calais. The Treasury also faced a legal challenge from cross-Channel operator Hoverspeed.

This time, Greening is confident she has the support of the tobacco industry and believes a guideline limit of 800 cigarettes — commonplace across the continent — is well established in European law. Campaign group Action on Smoking and Health is also supportive.

The Tobacco Manufacturers Association said it would not oppose the reduced guideline limits but noted the move would not be welcomed by low-income smokers, coming a month after heavy price rises imposed in the budget. Paul Stockall of the TMA said the budget imposed the steepest price rises on cheap cigarettes and rolling tobacco, the price of a packet of 20 cigarettes and a 25g pouch rising around 10% to £5.64 and £7.34 respectively.

“We would expect non-duty-paid [smuggled cigarettes] sales to increase,” he added.

More than one in 10 cigarettes smoked in the UK is smuggled or bought legitimately by overseas travellers. The figure for rolling tobacco is almost half. Tobacco sales nevertheless generate £8.8bn in tax each year for Treasury coffers.

The controversial move to lower guideline limits for returning holiday-makers is part of a broader package of measures which will see a 20% budget increase for Revenue & Customs’ 685-strong anti-smuggling team. Additional resources will primarily be focused on intelligence operations overseas, where seizures exceeded 1bn cigarettes for the first time last year.

The biggest loss to the Treasury comes from counterfeit tobacco products and so-called “illicit white” – brands manufactured for overseas markets and smuggled into the UK, the most prevalent of which is Jin Ling, which is made in Kaliningrad, Russia.

Deborah Arnott, chief executive of Action on Smoking and Health said: “ASH welcomes the much of HMRC’s new strategy particularly increased investment in tackling smuggling. However, there is too much weight placed on collaboration with the tobacco industry which has historically been a major driver of smuggling, and no reference to the UK’s obligations to protect tobacco control from the vested interests of the tobacco industry. And there is no clear ambition for the size of reduction in the illicit market which they expect to achieve from this increased investment.”

The House of Delegates’ version of legislation to increase state tobacco taxes advanced in the Health and Human Resources Committee on a 13-10 vote Tuesday — after committee members rebuffed an attempt to insert mandatory drug testing for welfare recipients into the bill.

Legislation to require random drug testing of recipients of food stamps or money from the Temporary Assistance to Needy Families program has been a perennial proposal of House Republicans for several sessions.

Its longtime lead advocate, former delegate Craig Blair, R-Berkeley, is no longer in the Legislature, having lost a state Senate bid last fall.

On Tuesday, Delegate Patrick Lane, R-Kanawha, was the lead sponsor for amending the tobacco tax bill (HB2973) to take $2 million of the bill’s projected $130 million of new tax revenue to fund the drug testing program.

Lane said the proposal was not intended, as critics have charged, to target the poor or minorities.

“It’s not cute. It’s not a joke. It’s a real issue,” he said. “It’s my belief that even the threat of a random drug test will cause some people to clean up.”

Delegate Meshea Poore, D-Kanawha, said she was offended by the implication of the proposal — that people receiving state assistance are presumed to be more likely to abuse drugs.

“Maybe we should test everyone who gets a state check — including everyone in this room,” she said.

Delegate Tom Campbell, D-Greenbrier, said he was concerned the drug-testing amendment would detract from the real purpose of the bill, to discourage young people from smoking.

“We’re dealing with a drug problem within the context of this bill, with tobacco,” he said.

The amendment was rejected, 14-9. Both the vote on the amendment and the passage vote Tuesday split largely on party lines.