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Tax news is dry but important

| September 8, 2014

The New York State Department of Taxation and Finance has addressed one of the major issues in tax administration by defining the difference between ‘big’ and ‘little’ cigars, according to a report by the National Law Review.

After giving details of the definitions (http://www.natlawreview.com/article/case-we-didn-t-know-difference-between-big-and-little-cigars-new-york-state-tax-depa), the Review goes on to say that the importance of the ruling is that little cigars and cigarettes are taxed at the same rate, which is lower than the rate on big cigars.

It then goes on to say: ‘This is probably the most important tax development to come along since the Internal Revenue Service released Revenue Ruling 63-194, 1963-2 C.B. 670, explaining the requirements that a martini would have to meet to be considered a “dry martini” for tax purposes’

Health bodies look to attack tobacco profits by closing cigarette price gap

| September 5, 2014

The Irish Heart Foundation (IHF) and the Irish Cancer Society (ICS) are calling in their pre-budget submissions for tobacco tax measures that would close the price gap between less expensive and premium brands, according to a story by Dan Buckley for the Irish Examiner.

Cigarette prices in Ireland range between €8 and €9.85 per pack,

“We are calling on the Minister for Finance to adjust the structure of tobacco taxation to ensure tax increases benefit the Exchequer, rather than the tobacco industry,” said Kathleen O’Meara, head of advocacy and communications at the ICS.

“Our current tobacco tax structure enables smokers to down-trade to cheaper brands rather than quit, and while this option is available, price increases will be less effective.”

Younger smokers especially have been switching to less expensive brands of cigarettes, according to an opinion poll conducted for the ICS and IHF.

So while about 66 percent of smokers of all ages now choose brands based on price, that rate rises to 74 percent among 18- to 24-year-olds, the countrywide poll of 1,000 adults shows.

“We know that tobacco companies in Ireland make profits of up to 55 percent after duties on sales, compared to regular profit margins of 12-20 percent for consumer goods,” said Chris Macey of the IHF.

“By changing the tax structure we can achieve the double whammy of preventing these firms from keeping smokers hooked through lower prices, while also ensuring they pay more towards the massive health costs associated with their deadly products.”

The ICS and IHF also want an annual price escalator of inflation plus 5 percent on cigarettes, which, if applied, would cause the price of a pack to increase by 50 cents in October’s budget.

Smokers to pay for revenue shortfall

| September 5, 2014

A below-expected cigarette production level during the first half of this year was partly responsible for Indonesia’s revenue falling below target, according to an en.tempo.co story.

During a House of Representatives Budget Committee meeting on Wednesday night, Agung Kuswandono, director general of Customs and Excise, said two factors had conspired to reduce the targeted revenue. The first was a ban on raw mineral exports since the enactment of the Mineral and Coal Law.

The second was down to the lower-than-expected cigarette production level that had caused cigarette tax revenues to fall below target. Customs and Excise had initially predicted cigarette production would reach 358 billion by the middle of the year.

However, production reached only 353 billion. “In terms of health, reduction in cigarette production is a good thing,” Agung told the Committee. “However, in terms of excise revenue, it certainly has a different meaning.” The upshot of the revenue shortfall is likely to fall on to the shoulders of smokers.

Agung said that his department had delivered a plan to the Budgeting Board of the House of Representatives for an increase in tobacco excise amounting to 10.2 percent.

No reason to believe in gateway effect

| September 5, 2014

The US-based Consumer Advocates for Smoke-free Alternatives Association (CASAA) has dismissed a study released on Wednesday by the New England Journal of Medicine in which it was reportedly claimed that electronic cigarettes could cause cocaine use.

‘In reality, the study shows no such thing, and the authors and journal are just trying to score political points based on an unimportant technical study of mice with no real-world implications,’ the CASAA said.

‘The study results only suggest that mice dosed with nicotine one day react differently, biologically, to cocaine the next day compared to those who are not.

‘They do not suggest that nicotine use will cause people to seek out or use cocaine.’

Carl V. Phillips, scientific director of CASAA said that the study said little about human biology and nothing at all about real-world behaviour.

“It does not even measure mouse behaviour,” he said.

“The study provides no evidence there is a gateway effect, and there is no reason to believe there is one.

“Even if there were, this would merely be one hypothesis about why it happens, and tell us nothing about the real world.”

The CASAA response is at: ttps://docs.google.com/a/kachange.eu/document/d/1R_XsC0kOg5e1rXKztYt3ANbGPHC1pq6-xJSVB-EUgmg/edit?pli=1

Health bodies cave in to fear of unknown

| September 5, 2014

Denmark’s board of health, cancer society, lung association and heart foundation have warned against the use of electronic cigarettes, according to a story by Lucie Rychla for the Copenhagen Post, citing the scientific magazine, Videnskab.

Although the health consequences of using electronic cigarettes are not known, these health authorities are apparently recommending that the 150,000 Danes who are using them ‘consider carefully’ whether they should continue to use them.

It was not clear from the story whether or not the authorities were recommending that users of electronic cigarettes who had quit smoking or cut down on smoking by switching to electronic cigarettes should consider returning to smoking or returning to smoking full time. But given the apparently highly-addictive nature of nicotine and the poor quitting record offered by other products and systems, smoking would seem to be the only alternative to vaping.

The researchers were said to fear that electronic cigarettes containing nicotine could lead to addiction and be a step to smoking tobacco cigarettes.

They apparently worry that vaping, in addition to presenting a health hazard (though that health hazard is acknowledged to be unknown), might lead to an increased number of smokers.

Smokers’ loss is tobacco stores’ gain

| September 4, 2014

The share prices of South Korea’s convenience stores are on the rise on expectations of tobacco price hikes, according to a story in The Korea Economic Daily.

As was reported here yesterday, Korea’s Health and Welfare Minister, Moon Hyung-pyo, said on Tuesday that he hoped to see cigarette prices nearly doubled during the next six years so as to reduce the country’s smoking rate.

Moon said prices should be raised to at least WON3,300 ($3.24) per pack immediately, partly to reflect the general rise in consumer prices, and to WON4,500 by 2020.

The Daily reported that at 09:09 hours yesterday, the shares of GS Retail were traded at WON25,050, up 6.60 percent (WON1,550) from the previous day’s closing price. BGF Retail shares were traded at WON66,700, up 3.73 percent (WON2,400) from WON64,300.

At the same time, KT&G shares rose by 1.67 percent (WON1,600) to WON97,300.

The newspaper quoted Hyundai Securities as saying that the major beneficiaries of the cigarette price hike would be convenience stores, given the share of tobacco sales revenue in total convenience store revenue was very high.

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