WHO urges Philippine senate to defy tobacco lobby and boost cigarette taxes

The World Health Organization urged Philippine senators Friday to resist tobacco industry pressure and pass legislation to boost cigarette taxes to help deter smoking in a country where tobacco-related disease kills 87,000 people a year. WHO Philippine representative Dr. Soe Nyunt-U said making cigarettes more expensive -- they sell for about a half a dollar per pack in the Philippines -- is the "most powerful policy tool" to reduce tobacco use. He also warned of an "irreconcilable conflict" between public health and tobacco interests.

"WHO calls on the government to be alert and resist these efforts of the tobacco industry to undermine tobacco control policies," he said. The Philippine Senate is debating the measure after similar legislation was passed by the Philippine House of Representatives. Some 17.3 million people in the Philippines smoke -- one of Southeast Asia's highest rates of smoking -- and 87,000 die per year of tobacco-related disease, Philippine Health Undersecretary Paulyn Jean Ubial said. Most of the victims also are among the country's poorest, putting a strain on the already limited funds for public health care, she said. About 47 percent of smokers are adult men, but the number of smokers among women and children is growing.

Dr. Matthew Myers, president of the U.S.-based Campaign for Tobacco-Free Kids, warned Philippine senators that if they passed a watered-down version of the proposed law, "you are literally trading the lives of Filipino children for political compromise." The House has passed legislation raising taxes on both cigarettes and alcohol. After the 23-member Senate finalizes its own version of the legislation, a joint legislative committee will craft the final form before it is signed into law by President Benigno Aquino III. Aquino is a smoker but has backed the legislation as a way to "minimize vices and raise funds for health care."

The House bill is projected to raise cigarette tax revenues from 25 billion pesos ($581 million) to about 33 billion pesos ($767 million) in the first year it is implemented. Ubial says the House version of the legislation would reduce the number of smokers by 170,000 per year, based on experiences of countries that have passed similar laws. PMFTC Inc., which controls more than 90 percent of the Philippine cigarette market, has called the propose taxes `'unreasonable," saying it would encourage smuggling of cheap cigarettes and undermine the government's revenue goals.

Gloucester County freeholders look to ban smoking in public parks

Smokers make have to take their butts elsewhere if the Gloucester County freeholders do what they intend to — ban tobacco use in all county parks and recreational areas. A resolution, up for consideration at tonight’s regular meeting, would amend the parks and recreation rules to clear the cigarette smoke out of the county’s four public parks. “We’ve thought about it for a while now,” said Freeholder Director Robert M. Damminger. “When the latest report (from the American Cancer Society) came out, we really got the ball rolling on this.”

The recent study — which closely examined New Jersey — revealed that South Jersey residents are more likely to have cancer than those in northern New Jersey due to smoking more. The report also showed that the rates of cancer and deaths from cancer in the state are higher than the national average. “We think our families and their children should have a clean and safe environment,” Damminger said. “And if they want to smoke, they can leave the premises.” The public seems to agree. And disagree. “I don’t see why they would be against it. It’s open air. It’s not like sitting in a restaurant where people are getting second-hand smoke,” said Greenwich Township resident Cliff Boardman, who was at Red Bank Battlefield Park in National Park on Tuesday.

“They’re really pushing this now, huh?” National Park resident Kari Tomeo and her friend Victoria Rastelli, both of Deptford Township, were split on the matter. Both women were also watching over their children at the playground. “I think that sucks,” Tomeo said. “I think it’s an excellent idea,” Rastelli said. “It’s outside. If you’re on a bench 20 feet from someone else, it shouldn’t matter,” Tomeo said. “But people litter and don’t throw things away,” Rastelli argued. “There’s kids around here and they don’t need to be picking up cigarette butts.”

Both women were at the park watching over their own children as they disagreed. Steve Sprague, from Cross Keys, wasn’t a fan of the idea. “I think it’s probably a bad idea,” Sprague said. “It’s out in public, in open air. There’s too many restrictions already. Too much government control can’t be a good thing.” Gloucester County’s four public parks include James J. Atkinson Memorial Park in Washington Township, Scotland Run Park in Clayton, Red Bank Battlefield Park in National Park and Greenwich Lake Park in Greenwich Township. More than 650,000 people visit these parks each year. The enforcement of a smoking ban falls within the jurisdiction of local law enforcement, according to the county.

Washington Township and Clayton already have ordinances in place that prohibit smoking at public and recreational locations. Damminger said the county has already engaged in a dialogue with both National Park and Greenwich to adopt similar ordinances so that the ban could be enforced. “Smoking is unhealthy and it sends the wrong message to children. When you go to a park you see toddlers playing and people engaging in healthy activities, the last thing you want is second hand smoke and cigarette butts on the ground,” Freeholder Adam J. Taliaferro said. Taliaferro, liaison to the Department of Parks and Recreation, said that although the volume of constituent complaints about smoking have been low, he felt it was important to officially act and prohibit smoking in the county parks.

Voter Approval Sought for Long Beach Medical Marijuana

Medical Marijuana advocates in Long Beach filed documents yesterday notifying the City of their intent to collect signatures to authorize a Ballot Initiative. The proposed measure would require City officials to regulate medical marijuana dispensaries to comply with California State law. In addition to limiting the number of dispensaries in Long Beach, and ensuring that they are not located near schools, public beaches and parks, the initiative calls for a tax of up to 4% to be paid into the City’s General Fund.

Jeremy Coltharp filed documents on behalf of patient members throughout Long Beach, and indicated that patients seeking relief from debilitating illness are concerned with ensuring that they are able to receive medical marijuana in safe and secure locations. “It’s important that the City of Long Beach provides the leadership needed to ensure the health and safety of all its citizens, both medical marijuana patients and the community as a whole”, stated Coltharp.

“Regulation of medical marijuana distribution will ensure that dispensaries have clear expectations to which they must adhere, and will also ensure that sick patients are are not forced to turn to back alley drug dealers.” In July, the Long Beach City Council voted to outlaw medical marijuana, rather than regulate its distribution in the City, in violation of recent binding court rulings that declared total bans to be illegal under California law. Those key court decisions follow the Compassionate Use Act of 1996, a landmark voter initiative by which voters authorized the use and distribution of marijuana for medicinal purposes.

The initiative was passed by an overwhelming majority of Long Beach voters, and served as an example to seventeen other states and the District of Columbia that have since passed similar medical marijuana laws. At least six other states are currently considering such laws. Coltharp anticipates collecting signatures from 15% of registered voters in Long Beach in order to qualify for a special election. “We continue to look to our City leaders to find the best way to ensure public safety. ” said Coltharp, “I’m confident that our City Council will will find a way to do that without endangering the quality of life of so many people in need.”

Sullivan marijuana grow house ring leaders charged

Preet Bharara, the United States Attorney for the Southern District of New York, and Wilbert Plummer, the Acting Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), announced on August 2 the unsealing of an Indictment against FRANK NATIELLO III, JOSHUA SCHULTZ, JESUS GUTIERREZ, CLEMENTE FERNANDEZ, and JUAN DAVID ZAPATA-MONTOYA (the “Natiello Organization”), for their roles in operating several marijuana “grow houses” in Sullivan County that grew and distributed multi-million dollar quantities of marijuana.

U.S. Attorney Bharara stated: “The Natiello Organization was hiding their alleged marijuana cultivation and distribution operation in plain sight – using houses and garages in rural Sullivan County as a cover. Thanks to the cooperative efforts of law enforcement, their operations have been shut down and they are out of business.” Acting DEA Special Agent-in-Charge Plummer stated: “Investigations reveal that residences and industrial locations located throughout the state are a popular choice for marijuana grows. The Drug Enforcement Administration continues to uncover sophisticated marijuana grows.

The marijuana grows operating in residences are designed to yield substantial quantities of high potency marijuana, while attempting to avoid prosecution. These multi-ton seizures ensure that these dangerous drugs will not reach our communities.” The following allegations are based on the Indictment unsealed today in White Plains federal court: From 1998 through April 2011, the Natiello Organization grew, and then distributed, thousands of pounds of marijuana that was cultivated in grow houses in rural areas of Sullivan County, New York. The Natiello Organization established their grow houses in residential homes, garages and other structures that were retrofitted with high intensity lights and ventilation systems.

They grew hundreds of potted marijuana plants at a time, which were then dried and trimmed so they could be collected and sold for thousands of dollars a pound. On March 29, 2011, law enforcement officers seized approximately 7,900 marijuana plants from grow houses operated by the Natiello Organization and arrested 15 of its members – each of whom has pled guilty to conspiring to manufacture, distribute and possess with intent to distribute, marijuana plants.

City strikes down smoking ban proposal

Beech Grove smokers can continue smoking in local bars, after the city council there voted down a smoking ban proposal. Beech Grove City Council voted 2-5 Monday night on the proposal to ban smoking in local bars; the measure failed. Before the vote, about 20 people spoke at the meeting, including four bar owners.

 Bar owners told the council that they believed people should have the right to choose whether they want to smoke. Indianapolis remains under a smoking ban. A statewide smoking ban that began this year exempts bars and taverns.

Concerns over valuations, cigarette volumes weigh on ITC

ITC’s June quarter numbers were slightly ahead of Street expectations. Higher-than-expected cigarette volume growth of about one per cent against expectations of a two per cent decline, expansion in margins and good performance of the consumer goods, agricultural and paper businesses helped ITC post robust results. However, the stock fell two per cent to close at Rs 249.45 on Thursday, as against the Sensex’s fall of 0.2 per cent.

Though ITC is expected to post a strong performance this financial year as well, some analysts are worried over the growth in cigarette volumes in 2012-13. Analysts are also divided in terms of stock valuations, which are not cheap at current levels. At nearly 30 times FY13 estimated earnings, the stock is trading at the higher end of its one-year forward price/earnings band of 18-30 times seen in the past five years. It has been seen in the past five years that whenever the stock’s one-year forward PE comes close to the higher band, it tends to underperform/fall thereafter for a couple of months.

However, the current weak macro environment could continue to play in its favour (read: demand for defensives), at least till the ‘risk on’ sentiment gains. V Srinivasan, research analyst at Angel Broking, says, “ITC posted healthy sales and net profit growth. We continue to remain neutral on the stock, as we believe it is fairly priced at current levels.” On the other hand, analysts at Morgan Stanley Research wrote in a post-results note, “ITC results were overall in line with expectations. We reiterate our overweight rating on ITC, given unparalleled visibility for earnings growth, which will likely continue to support valuations, we believe.”

 The difference on valuations perhaps also stems from the fact that analysts are divided on cigarette volume growth, wherein estimates vary between minus three to plus three per cent for FY13. That’s because some believe ITC would raise prices to the extent that it fully passes on the cost increases seen, while others believe partial hikes will be taken. Data from the past 15 years (as compiled by IIFL Research) shows a strong inverse correlation between price increases and ITC’s cigarette volumes. When price rises are in excess of seven per cent, volume growth in the cigarette business tends to be muted and vice versa.

In FY13 so far, analysts say, ITC has already taken a price rise of about 15 per cent, led by an increase in taxes, and some more is in the offing. The silver lining could be the entry of ITC in the sub-65 mm segment. ITC is already testing its products in 64-mm cigarettes in UP and Bihar. Analysts believe this segment could provide support to volumes to the extent of one to two per cent, even as they are monitoring the situation, given the price differential with unorganised cigarettes. Beyond cigarettes, which account for over 80 per cent of ITC’s profits, the break-even of the other fast-moving consumer goods (FMCG) business would act as a key trigger to earnings growth. Also, pick up in its hotels business will remain a key monitorable.

Cigarette manufacturers: FBR accused of introducing complicated FED system

The Federal Board of Revenue (FBR) has introduced a very complex 'slabs system' of the Federal Excise Duty (FED) for the cigarette manufacturers which has only benefited the multinational companies with stagnation in the incidence of taxes ie sales tax/FED on most popular brands of the product. Tax experts told Business Recorder here on Thursday that the multinational companies and the FBR had deliberately implemented a very complicated excise duty system to charge less amount of FED on popular brands of cigarettes. The existing taxation system of the FED is so complicated which only give maximum benefit to the cigarette manufactures.

Prior to budget (2012-2013), World Health Organisation (WHO) has recommended that the FBR should abolish the existing FED charged on the basis of threshold and slabs of the FED for different brands of cigarettes. All brands be treated at par instead of tier system, there should be one system which ensure revenue for the government, help FBR in ensuing compliance and easy to comprehend by all stakeholders. Due to unknown reasons, the FBR fully endorsed the complicated excise regime which facilitates the leading multinational companies.

Tax officials and the cigarette manufacturers have made the excise duty structure in such a manner that ordinary consumer would be totally confused while understating the techniques used for imposition of the excise duty on cigarettes. One of the reasons for implementing a confusing tax system for cigarettes is that some of retired bureaucrats have been hired by multinational companies having connection in government circles and policy makers. Recently, it has been reported that the foreign companies have transferred an amount of over $1 billion aboard on account of profit and dividend during the last fiscal (2011-12).

The repatriation of profit and dividend by foreign companies is again on rise and they are repeatedly transferring their profits and dividends. The foreign investors have repatriated nearly $1.061 billion on account of profit and dividend in fiscal 2012 against $758.3 million in fiscal 2011, depicting an increase of $303 million. On the other hand, multinational companies in the tobacco sector are using different techniques to ensure minimum increase in incidence of taxes on cigarettes. When contacted, a tax official, who have done research on cigarette industry, explained that firstly the existing tax structure should be simple. The present tax structure is complicated and favors to the multinational companies. The incidence of taxes on lower brands should be higher as compared to existing structure.

 The incidence of sales tax and federal excise duty on cigarette has not been increased at par with the globally applicable tax rates on popular brands. Globally, there is a standard that the incidence of tax on cigarettes should be at least 70 percent as the cost of production of this commodity is very low. The incidence of sales tax and FED on the strong brands of cigarette could be termed as stagnant in Pakistan as compared to other countries where incidence of taxes goes up to 70 percent. In Pakistan, if the incidence of sales tax/FED was 42 percent on a specified brand, it has been increased to 45 percent and then 52 percent on annual basis.

However, even the incidence of sales tax/FED has been taken up to 60 percent it is still very low as compared to the 70 percent. The technique used by the multinational companies is to re-adjust the middle slabs with upward adjustment in price. In this way, the incidence of the sales tax and the FED has not been increased, but the price has been increased for popular brands to ensure that the incidence of taxes should remain on the lower side. "Resultantly, the FED has been increased in terms of rupees, but in term of percentage, the incidence of the FED did not increase. Apparently, the excise duty has been increase due to increase in price of cigarettes, whereas the incidence in actual terms of percentage has not proportionately increased, he added.

 If the incidence of taxes is 70 percent on a specific brand, the technique is to ensure incidence of tax of 50 percent or 60 percent on most popular brands. If the market is captured by two popular brands, their actual incidence of taxes would not be increased at par with the global prevailing rates of taxes. This has been done by increasing prices linking with the FED, but the direct incidence of taxes has not increased. Official said that the multinational companies have also adopted another technique to discourage introduction of new brands by local units of Mardan etc. This has been done by fixing a minimum price for launching of a new brand. A new brand cannot be launched unless of until a specific price has been fixed which discourages local units to introduce new brands.