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Hungary threatens penalties for tax policy complaint

| July 27, 2015

Hungary will not shy away from penalizing retailers and tobacco companies further for lodging tax complaints with the European Commission, according to a Portfolio story.

“We are not planning to surrender to the European Commission with respect to the special taxes on the retail and tobacco industries,” Janos Lazar, minister leading the Prime Minister’s Office, told journalists.

Earlier this month, the Commission opened two separate ‘in-depth’ investigations to examine further whether two recent Hungarian tax measures with steeply progressive rate structures were in line with EU state aid rules. One measure concerned a tax on turnover from the production of and trade in tobacco products.

‘At this stage, the Commission has concerns … that the progressivity of the rates based on turnover provides companies with a low turnover a selective advantage over their competitors, in breach of EU state aid rules,’ the Commission said in a press note.

‘The Commission has also issued injunctions, prohibiting Hungary from applying the progressive rates until the Commission has concluded its assessment.

‘The opening of in-depth investigations gives interested third parties the opportunity to comment on the measures under assessment. It does not prejudge the outcome of the investigations.’

This year, Hungary introduced a new tax on tobacco products, referred to as a ‘health contribution’, under which tax rates are steeply progressive; so companies with a low turnover are liable to pay a tax of 0.2 percent of their turnover from the production and sale of tobacco products, while companies with a higher turnover are subject to a rate of up to 4.5 percent of their turnover.

‘The Commission looked into the issue because it received a complaint,’ the press note said.

‘The Commission welcomes member state measures to reduce tobacco consumption. However, it has doubts that the effects of tobacco products on public health increase progressively with the turnover of companies selling them.

‘Because of the progressive rates, companies with a low turnover pay substantially lower taxes than companies with a high turnover. So far, Hungary has provided no objective reasons that would justify a differentiated treatment between companies with different turnovers.

‘The legislation also allows companies to reduce their liability under this tax if they make certain investments in tangible assets. The Commission is concerned that this may grant a selective advantage to such companies, and Hungary has not at this stage demonstrated that the reductions are compatible with the single market.’

Under EU law, member states are competent to decide on their taxation systems. However, member states have to ensure their tax systems respect EU rules on state aid (by not granting selective advantages to particular companies) and on the single market (e.g. by ensuring the freedom of establishment, free movement of goods, services and capital, and non-discrimination between domestic products and those from other member states).

“Rest assured, these companies will pay more than the originally planned 40 billion forints, said Lazar. “They will pay so much more that it will discourage them from reporting Hungary.”

He added that the higher burden could be expected in the new tax year.

Government ‘hand in glove’ with tobacco industry

| July 27, 2015

While India had signed up to the World Health Organization’s Framework Convention on Tobacco Control, it had failed to initiate even the first steps towards honoring the agreement, according to a story in the Times of India.

The Union government, mainly due to pressure from the tobacco lobby, had never seriously initiated policies aimed at ‘banning’ tobacco in any form.

“The government is hand in glove with the tobacco industry,” Dr. Prakash Gupta, an anti-tobacco crusader from Mumbai and the director of the Healis Sekhasaria Institute of Health Sciences, Mumbai, was quoted as saying.

Gupta was in the city for a seminar organized by the RST Regional Cancer Hospital on Sunday to mark the World Head and Neck Cancer Day.

“That is the reason why it has never let the Committee on Subordinate Legislation or COSL work and come out with its recommendations.

“How can you have people from the tobacco industry in the committee which is expected to frame legislations against tobacco?

“But despite the evident conflict of interest, representatives of this industry have always been there in the government decision-making bodies.”

Tourists to take Tobacco Trail in Cuba

| July 27, 2015

Cuba is preparing to unveil a new tourist attraction inspired by the country’s cigar industry, according to a Xinhua Newswire story.

Cuba’s Tourism Ministry said recently that it would launch the Tobacco Trail in September during this year’s tourism and nature fair in Pinar del Rio province, which is home to lush tobacco plantations.

“We aim to show visitors all the steps involved in an enterprise that has distinguished this province for centuries,” said Deborah Henriquez, the ministry’s provincial delegate.

The Tobacco Trail will begin in the town of Consolacion del Sur, the gateway to the province, and feature the verdant Vinales Valley, a UNESCO World Heritage Site, where the leaves used to roll Cuba’s cigars are cultivated.

While new tobacco sowing methods have been introduced in the region, many traditional farming techniques are still in use, including plows powered by oxen.

Tourists will visit the factories where Cuba’s premium hand-rolled cigars are made.

Cigarettes in plain packaging seen as more harmful

| July 27, 2015

New Irish research published on BMJ Open has found that people aged 16-17 see standardized packs as being less attractive than packs with EU Tobacco Products Directive (TPD) warnings, which include graphics and text covering 65 per cent of a pack’s main surfaces, according to a story in the Irish Times.

And they perceive that the cigarettes contained in standardized packs are more harmful than those in TPD-style packs.

The Tobacco Free Research Institute Ireland (TFRI) conducted a nation-wide survey of 1,378 secondary school students to test attitudes towards standardized and TPD packs. Students were asked to compare packs on the basis of attractiveness and perceived health risk.

The Times story said that, in all instances, ‘cigarettes in EU TPD packs were thought to be more attractive and less risky than cigarettes in standardized packs – including the Silk Cut, Marlboro, and Benson and Hedges brands’.

Dr. Kate Babineau, postdoctoral research fellow with the TFRI, said that while it might seem obvious that young people preferred branded packs to standardized packs, many continued to argue that packaging was irrelevant.

“These findings are in line with dozens of international studies which prove that packaging elements do influence young people’s perceptions of products,” she said.

In March, Ireland’s President Michael D. Higgins signed into law standardized tobacco packaging legislation under which cigarette manufacturers will be required, from May 2016, to produce cigarettes for the Irish market in standardized packaging.

From May 2017 only cigarettes in standardized packaging will be allowed to be sold on the Irish market.

Ireland was the second country after Australia to bring in such legislation. In Australia, standardized packaging has been a requirement since December 2012.

Also in March, the Japan Tobacco group initiated a High Court action against the Irish government aimed at blocking the requirement that cigarettes should be sold in standardized packs.

RAI to make investment presentations in NY, London

| July 27, 2015

The management of Reynolds American Inc. and its operating companies will discuss the companies’ performances and plans during presentations to the investment community in New York on July 31 and in London on August 3.

The presentations will be webcast from about 09.00 local time on both days.

The webcasts will be available online on a listen-only basis at after registration at the Investors section, Events & Presentations.

A replay will be made available on the website.

Canadian firms overturn C$1.1 billion court order

| July 24, 2015

Imperial Tobacco Canada, British American Tobacco’s Canadian subsidiary and the Canadian subsidiaries of Philip Morris International and Japan Tobacco International, yesterday had their request to cancel a C$1.1 billion provisional execution order granted by the Quebec Court of Appeal.

Three Quebec Court of Appeal judges unanimously cancelled the order after Imperial Tobacco Canada, Rothmans, Benson & Hedges, and JTI-Macdonald had argued that there was no legal basis for the provisional execution order.

BAT, in a note posted on its website, said the provisional execution order had been imposed by the Superior Court of Quebec as part of a C$15.6 billion judgement in two class action cases issued on June 1.

“We are pleased to see Imperial Tobacco Canada’s arguments prevail so convincingly with the cancellation of an unprecedented and legally unjustified provisional execution order,” said Jerome Abelman, BAT’s group director, Legal & External Affairs.

“Imperial Tobacco Canada will now focus on its appeal at the Quebec Court of Appeal against the original Superior Court of Quebec Class Action judgement issued on 1st June 2015 which the company argues ignored the reality that both adult consumers and governments have known about the risks associated with smoking for decades.

“Imperial Tobacco Canada has informed us that it is concentrating on continuing its appeal against the substantive elements of the original ruling and that the team is confident its legal arguments will ultimately prevail.”

BAT, which was not a party to the proceeding and is not a party to the original judgement, said the Court of Appeal process was expected to conclude within the next two-to-three years, though there could be a further appeal to the Supreme Court of Canada.

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