MAC update April 2016


Tobacco companies minting money while whining to governments

April is crucial month for tobacco companies as they declare their quarterly results for 2016 and release their annual reports for 2015. All in all with 125 million smokers in ASEAN the tobacco companies are minting money from selling an addictive product. However they are whining, complaining and making outrageous demands.

BAT Malaysia for example is grumbling that it recorded a revenue reduction of 4.5 percent and gross profit of 2.2 percent in the financial year 2015 and blamed it on the tax increase which resulted in lesser sales of cigarettes. However, BAT Malaysia still managed to record a 0.9 percent increase in its net profits to RM910 million for the financial year 2015. 

BAT Malaysia had the audacity to ask the government to impose a “3-year moratorium on further excise tax hikes” to “allow the market to stabilize”. BAT and its affiliate organization, CMTM, were spewing inflated data on the smuggling problem to scare the government. However, BAT has not addressed that its product is responsible for many of the 20,000 deaths in Malaysia every year and that under the FCTC the government is obligated to increase tax to reduce consumption.

Meanwhile BAT parent company reports its cigarette volume for the first three months of 2016, is 158 billion sticks, which is an increase of 3.6 percent compared to first quarter of 2015. BAT proudly reports its sales volume increased in a number of markets including Indonesia, Vietnam and Japan which more than offset the lower volume in markets such as Malaysia.

Similarly Philip Morris Philippines (PMFTC) has been grumbling about the excise tax hikes related declines in the Philippines which saw its market share reduce from 93% in 2010, to 75% in 2013, to 73% in 2015. However PMI has just released its 2015 annual report where it reports PMI total share in the world, increased to 28.7% selling some 847.3 billion sticks in 2015. For 2015, PMI’s net revenue is $79.3 billion, while its operating income is $10.6 billion. From Asia alone, its net revenue is about $20 billion, and operating income about $3 billion.

These obscene profits from an addictive product must be measured against the devastating impact of disease and death in the ASEAN – about 500,000 deaths annually.

In Thailand, the Thai Tobacco Monopoly took an unscrupulous step to undermine tax increase this year and announced a plan to introduce a new brand of cheap cigarettes to target the low-income sector – a move immediately denounced by tobacco control advocates.

The higher tax will add an estimated 12 billion baht ($341 million) in revenue this fiscal year and 15 billion ($426 million) annually in subsequent years, according to the Finance Ministry. “Ideally the tax increases should be implemented every year, since the effects would run out every six months due to the substitution effect, where consumers switch to lower priced brands,” said Prof. Prakit Vathesatogkit, a member of the national committee on tobacco control.


Philip Morris Thailand charged for tax evasion

Thai Prosecutors have charged Philip Morris Thailand and seven employees on 24 April for dodging hundreds of millions of dollars in import taxes, a crime carrying a fine of up to 80 billion baht. According to a news report the company is evading about 20 billion baht in taxes by under-declaring import prices for cigarettes from the Philippines between 2003 and 2006. Prosecutors say the duty-free end price of the cigarettes was much higher.

If convicted, prosecutors say the company could be fined up to four times the sum of unpaid tax, while the employees face a maximum of 10 years in jail. The next hearing will be in October.

WHO FCTC Article 19 encourages litigation against the tobacco companies: “The Parties shall consider taking legislative action or promoting their existing laws, where necessary, to deal with criminal and civil liability, including compensation where appropriate.

The tobacco companies have no qualms taking governments to court (pg 45). The Thai government has been sued by Philip Morris and other tobacco companies 8 times. Over the past several years, there have been cases against other ASEAN governments for their tobacco control measures: Indonesia – 6 cases, Malaysia – 3 cases, Philippines – 9 cases.

It is time for governments to get tough with the tobacco companies for their irresponsible marketing to children, tax evasion, lying about their product and continuing to deceive the public.