LC Paper No. CB(1)1759/10-11(04) (English version only) SUBMISSION COVER SHEET TOBACCO EXCISE TAX INCREASE IS PROVEN AS THE BEST WAY TO STOP CHILDREN AND YOUTH SMOKING , RECOMMENDED BY THE WORLD HEALTH ORGANISATION AND THE WORLD BANK AND MANDATED UNDER THE FCTC TREATY RATIFIED BY CHINA.. AFTER EACH TOBACCO TAX INCREASE IN HONG KONG CHILD AND YOUTH SMOKING PREVALENCE HAS DECREASED THUS PROVING THE EFFECTIVENESS OF THIS PUBLIC HEALTH MEASURE – SEE THE PROOF WITHIN THIS DOCUMENT. 60-65% OF CONTRABAND SEIZURES IN HKG DURING 2008-2010 WERE GENUINE PRODUCTS AND OF THESE GENUINE PRODUCTS 6.9% WERE MARKED ’HK DUTY NOT PAID’ – THIS IS THREE TIMES THE WORLD CONTRABAND NORM FOR GENUINE PRODUCT SEIZURES AND NEEDS ADDRESSING BY USE OF THE ORGANISED AND SERIOUS CRIME ORDINANCE AGAINST THE SUPPLY CHAINS AND PRODUCT MANUFACTURERS - THE TOBACCO COMPANIES’ DELIBERATE FAILURE TO CONTROL THEIR OWN SUPPLY CHAINS IS A MAJOR REASON FOR ILLICIT TOBACCO SMUGGLING AND WITHIN THIS DOCUMENT IS PROOF OF BIG TOBACCO’S HISTORY OF DIRECT INVOLVEMENT IN SMUGGLING OF ITS OWN PRODUCTS WHICH THEY REFER TO AS ‘DUTY NOT PAID / GENERAL CARGO’. IN EUROPE THE TOBACCO COMPANIES ARE FINED MASSIVELY IF THEIR PRODUCTS ARE FOUND IN THE BLACK MARKET AND HK SHOULD DO THE SAME. IN CANADA TOBACCO EXECUTIVES INVOLVED IN SMUGGLING THEIR OWN PRODUCTS WERE JAILED. WITHOUT REPLACEMENT YOUTH SMOKERS BIG TOBACCO WILL BE OUT OF BUSINESS. INCREASED TOBACCO TAXATION MAKES THEIR PRODUCTS UNAFFORDABLE TO CHILDREN AND YOUTH BY WAY OF RETAIL ELASTICITY. WORLDWIDE THE TOBACCO COMPANIES ALWAYS BLEAT THAT TOBACCO TAX INCREASES WILL CAUSE INCREASED SMUGGLING – THIS IS DISINGENUOUS SINCE THEY NEVER MENTION THAT THEIR OWN PRODUCT PRICE INCREASES WILL LIKEWISE CAUSE INCREASED SMUGGLING. CIGARETTES KILL 50% OF THEIR USERS AND REDUCE SMOKERS’ LIFETIMES AND PRODUCTIVITY BETWEEN 10 TO 15 YEARS -THE COST OF SMOKING TO HONG KONG SOCIETY INCLUDING LOSS OF LIFE PER YEAR IS AT LEAST HK$ 72 BILLION (HKU DEPT OF COMMUNITY MEDICINE based on 1998 costs) HK CUSTOMS DEPT FIGURES SHOWN IN THIS DOCUMENT CONFIRM ILLICIT TOBACCO SYNDICATES IN HK ARE ON THE DECLINE AS ARE THE QUANTITY OF CONTRABAND STICK SEIZURES WHILST DUTY FREE PRODUCTS HAVE BEEN LEAKED ILLEGALLY INTO THE BLACK MARKET. ALL PRODUCTS SOLD IN HK SHOULD BE SPECIFICALLY MARKED TO ASSIST TRACKING AND TRACING OF THE PRODUCTS. IMPORTING, PEDDLING AND POSSESSION OF NON DUTY PAID PRODUCTS SHOULD MERIT PRISON TERMS SINCE ALL ARE DEFRAUDING THE GOVERNMENT OF EXCISE INCOME AND USERS WILL EVENTUALLY REQUIRE MEDICAL TREATMENT ADDING FURTHER COSTS ON GOVERNMENT FUNDS. TOBACCO EXCISE TAX INCREASE IS A GOVT PREVENTATIVE HEALTH MEASURE AND ILLICIT TOBACCO SMUGGLING, PEDDLING AND BUYING ARE CRIMES. HK GOVERNMENT SHOULD BE INVESTING MORE FUNDS IN TOBACCO CONTROL AND ENFORCEMENT MANPOWER, ON CESSATION AND THE COSTS OF QUITTING (NICOTINE REPLACEMENT THERAPY /ACUPUNCTURE ) SHOULD BE FREE TO ALL RESIDENTS WANTING TO QUIT. THE NEWSPAPER VENDOR ASSOCIATION HAS STATED TO THE PRESS THAT THEIR BUSINESS HAS NOT BEEN AFFECTED (RELEVANT SCMP NEWS ARTICLE IS ATTACHED WITHIN THIS DOCUMENT.) 8/F Eastwood Centre - 5, A Kung Ngam Village Road - Shaukeiwan, Hong Kong Tel: (+852) 2579 9398 Fax: (+852) 2565 9537 Website: www.cleartheair.org.hk 25th March 2011 To: All Legco Members [email protected] To: Subcommittee on Public Revenue Protection (Dutiable Commodities) Order 2011 meeting on 2nd April 2011 (SPRP) [email protected] To: Legco Security Panel Meeting on 8th April 2011 [email protected] Dear Sir, SUBMISSION TO LEGCO MEMBERS ON TOBACCO TAXATION We are informed that the SPRP and the Security Panel will meet on the above dates and that the Tobacco Control Concern Group <TCCG> (amongst which are Tobacco company representatives) deputation has been permitted to attend the latter meeting . Clear the Air NGO wishes to provide herewith a written submission to the all Legco members listed above for them to study prior to the said meetings and for the information of all members of Legco. We are also aware that Legco members James To and Starry Lee in an ATV Newsline interview (http://app2.hkatv.com/v3/webtv/webtv.php?program=3000006 27th Feb 2011 Part 2) stated that they would vote against the tobacco tax increase and in an article in SCMP on 17th March Legislator Tommy Cheung reportedly stated "We oppose the increase and will try to reverse the plan for the car tax. I also want to oppose the tobacco duty increase ... I just think the rise - no matter 100 or 200 per cent - cannot deter all people from smoking." Presumably all members are fully aware of Hong Kong’s requirements and obligations under China as a ratified Party to the FCTC Treaty ? Clear the Air accordingly is providing information to enlighten all members of Legco , the SPRP and the Security Panel who might have preconceived ideas on the excise duty and supposed tobacco smuggling nexus. The Work Health Organisation Mpower report http://www.who.int/tobacco/mpower/mpower_english.pdf advises that the tax incidence of tobacco product retail pricing (especially in 1st world countries) should be at least 70% and in 1999 the World Bank (Curbing the Epidemic: Governments and the Economics of Tobacco Control) advised a tax incidence between 66.6% and 80% of retail pricing. The main intent of tobacco excise increases is to stop children and youth from starting smoking by way of making the products unaffordable to them. Smoking kills 50% of its users and without replacement youth smokers the tobacco companies would be out of business. Worldwide the tobacco companies all use the same tactics when faced with their major Armageddon : regular tobacco duty increases and the death of their ‘Silent Salesman’ – which is plain packaging of tobacco products to take away their marketing appeal to youth. This vile and highly regulated industry will always state that ‘if Governments increase tobacco tax then smuggling will automatically increase and Governments will lose revenue.’ In fact it is these companies themselves that propagate the smuggling by deliberately failing to control their supply chains as shown in the attached report. So what is the truth ? Here is what the dedicated Task Force from HK Customs has to say: 8/F Eastwood Centre - 5, A Kung Ngam Village Road - Shaukeiwan, Hong Kong Tel: (+852) 2579 9398 Fax: (+852) 2565 9537 Website: www.cleartheair.org.hk -----Original Message----- From: [email protected] [mailto:[email protected]] Sent: Thursday, February 18, 2010 18:01 To: James Middleton Cc: [email protected] Subject: Re : Cigarette Smuggling Dear Mr. Middleton, Thank you for your continuous support to our enforcement against illicit cigarettes and sharing your views with our Senior Inspector Lee Hoi-man in the past. Mr. Lee has been recently posted out and replaced by Mr. Wan Hing-chuen. You may send your precious opinions to him or to me in future. We are also much grateful for the series of mails on the same subject you sent to this Department during the Lunar New Year Holiday. The relevant materials are very informative and insightful. In response, we would like to let you have our views as follows : C&ED's effort against illicit cigarette activities In anticipation of the greater incentive for illicit cigarette activities following the increase in tobacco duty in Feb 2009, we have stepped up enforcement actions by internal redeployment. As a result, there have been increases in number of cases and arrests. However, the total seizure quantity has been dropping. Evidently, our stringent enforcement has cornered the culprits to scale down their operation. Examination of cigarette seizures Our operational objective in fighting illicit cigarettes is to protect revenue. Hence, we don't usually examine cigarette seizures in every case. However, for cases of smuggling and distribution in nature with significant seizure quantity, we would invite the trade mark owners to examine the cigarettes. In general, around 30% to 40% are found to be counterfeit. Since the cigarette seizures are intended for local black market, we believe the percentage can adequately reflect the overall situation. Control regime on cigarettes We adopt regulatory control and enforcement strategy against any illicit diversion of the imported or locally manufactured cigarettes. The Department would consistently monitor the situation and suggest to the Policy Bureau more effective measures whenever necessary. Project Crocodile “Project Crocodile” (the Project), which started on 1 August 2004, aims to form a united front to combat transnational cigarette smuggling activities. There are now 18 Customs Administrations participating in the project. Over the years, fruitful results have been attained because of the information exchange. The Project is running smooth and is still in force. Should you have any further opinions, please discuss with me or Mr. H C Wan (e-mail address : [email protected]) at any time. Best Regards, Andy W M Hui Divisional Commander (Anti-Illicit Cigarette Investigation) Hong Kong Customs and Excise Department 8/F Eastwood Centre - 5, A Kung Ngam Village Road - Shaukeiwan, Hong Kong Tel: (+852) 2579 9398 Fax: (+852) 2565 9537 Website: www.cleartheair.org.hk -----Original Message--- From: [email protected] Sent: Monday, July 12, 2010 12:19 To: James Middleton Subject: Re: FW: further data Dear Mr. Middleton, Thank you for your enquiry. Hong Kong Customs would, if necessary, invite trade-mark owners to examine the authenticity of cigarette seizures for the purpose of gathering evidence for criminal prosecution. As not all the brands of seized cigarettes have local trade-mark owners, we cannot conduct examination on all seized items and hence no actual figures on genuine cigarettes being seized can be obtained. However, we can estimate that counterfeit cigarettes account for about 35% to 40% of the total seizures of illicit cigarettes.