30 November 2024
Governments appear to be easily rattled by tobacco industry threats that tobacco smuggling will worsen if they increase excise tax of tobacco or ban e-cigarettes or other new tobacco products. It is the tobacco industry’s all-purpose arsenal to governments when opposing strong tobacco control measures.
This October, Malaysia, for the tenth consecutive year, did not increase tobacco tax, convinced it will exacerbate smuggling. Japan Tobacco International for example called for a freeze on tax increase on cigarettes. The government bought into the industry’s myths and data. However, even without any tax increase, smuggling has remained high illustrating tax increase is not significantly related to tobacco smuggling. According to the world bank, smuggling is a problem more due to poor administration and enforcement measures and a lack of efficient tracking and tracing features.
Following a tax increase recently in Hong Kong, the government reported, “A rise in Hong Kong’s tobacco tax has not resulted in “rampant” illicit cigarette trading activities.” A pack of 20-stick cigarettes increased on average by HK$12, from around HK$62 (US$8.00) to HK$74 (US$9.50). In February this year, the price increased further to HK$96 (US$12.30) per pack.
In Vietnam, the excise on tobacco accounts for 75% of factory prices, which is only 38.8% of retail prices, way below the WHO’s recommendation of 70%. The Ministry of Finance is currently working to amend the Law on Excise Tax to apply new fixed and regular taxes on tobacco but the Tax Consultants’ Association has warned the government that raising the luxury tax, or special consumption tax may ignite tobacco smuggling. Typical flawed industry argument that sudden and high taxes increase and, price increase of cigarettes will cause smokers to switch to smuggled products, resulting in budget losses, are still being channeled. Over 40% of males in Vietnam smoke, and regular and optimum tax increases on tobacco is an effective way to reduce consumption according to the WHO FCTC Article 6.
When lobbying to approve legislation on e-cigarettes in Malaysia and the Philippines, pro-vaping groups used the threat of smuggling to oppose Ministry of Health’s stand to ban these products.
When Malaysian legislators were debating the Tobacco and Smoking Control bill, which included a clause to prohibit anyone born from 1 January 2007 from purchasing any tobacco product, smoking substance, substitute tobacco product or smoking device [popularly referred to as the Generational End Game, (GEG)] the Malaysian Vapers Alliance, in opposing this clause, made an outlandish claim that it will result in “creating a new generation of criminals” and “Malaysia may very well turn into a crime-laden country.” Law makers caved-in to the smuggling scare tactic and the bill passed in 2023 without the GEG clause. Currently, Malaysia is facing a huge problem with smuggling of e-cigarettes anyway. See here, here and here.
In the Philippines, when the Vape bill was being debated and waiting approval, groups such as Philippine E-cigarette Industry Association (PECIA), Vapers PH and the Coalition of Asia Pacific Tobacco Harm Reduction Advocates (CAPHRA) fully supported the bill claiming it will “safeguard children while also ensuring that these items meet regulatory standards.” PECIA claimed, with the vape bill, “smuggling and illicit trade of substandard products will likewise be prevented.”
Since the passing of the Republic Act No. 11900 (Vaporized Nicotine and Non-Nicotine Products Regulation Act) in 2022, the Department of Trade and Industry, responsible for regulation, is monitoring about 90,000 online companies engaged in the vape business for compliance – including whether these businesses have the proper certifications, such as the Philippine Standard (PS) mark and the Import Commodity Clearance (ICC) sticker, are in place.
The Philippine Bureau of Customs reported that ₱5.07 billion (US$86 million) worth of e- cigarettes were seized in the first 10 months of 2024. Last August, the Bureau of Internal Revenue (BIR) reported it raided the Philippine Vape Festival during which it seized thousands of illicit vape products. The BIR said the festival was supposed to be a “compliance summit” to discuss compliance with “current regulation and policy changes.” The BIR-ITTF’s covert surveillance found that a lot of vape products displayed, distributed, and being sold at the festival had no internal revenue stamps – the conclusive mark of tax compliance.
While the law bans those below 18 years from purchasing e-cigarettes, currently more Filipino children are vaping. The 2019 Global Youth Tobacco Survey (GYTS) estimated that 14% or 1 in 7 students aged 13-15 years currently use e-cigarettes. According to the Health Promotion Bureau between 2015 and 2019, e-cigarette use among teenagers increased 110%, from 11.7% to 24.6%.
In Indonesia where e-cigarette sales are legal, there is also a smuggling problem as vape products are now smuggled along with cigarettes and other products.
Although there is the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products with 68 Parties, none of the ASEAN countries are Parties to this Protocol. They miss out on improving tobacco track and trace systems, transparency, disengagement with the industry on enforcement, and collaborating with other countries to tackle smuggling. Instead, they choose to remain vulnerable to industry misinformation and its scare tactics.
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