[Intl-tobacco] Taiwan: Government doubles health tax on tobacco products

[robert weissman]

Published on TaipeiTimes
http://www.taipeitimes.com/News/front/archives/2006/01/04/2003287313

Government doubles health tax on tobacco products
By Jackie Lin and Ko Shu-ling
STAFF REPORTERS , WITH AP
Wednesday, Jan 04, 2006,Page 1

The government is to double the "special health tax" on tobacco products
in a move to reduce the number of smokers and smoking-related diseases.

According to amendments to the Tobacco and Liquor Tax Law (=E8=8F=B8=E9=85=
=92=E7=A8=85=E6=B3=95)
passed yesterday by the legislature, a NT$500 (US$15) "special health
fee" will be levied per each 1,000 cigarettes. The original fee was NT$250.

The fee for loose tobacco, cigars and other cigarette products will be
increased from NT$250 to NT$500 per kilogram.

Ninety percent of the proceeds will be funneled into the national health
insurance program as a safety fund, while the remaining 10 percent will
go to central and local governments to pay for measures related to
health problems, a crackdown on bootleg cigarette products, combating
tax evasion on tobacco products and social welfare.

Statistics show that there are 4.5 million smokers in Taiwan, with more
than 200,000 of the nation's 23 million people picking up the habit
every year.

Smokers are six times more likely to develop throat cancer than their
non-smoking counterparts, 5.8 times more likely to develop cervical
cancer and are three times more likely to develop lung cancer.

The nation spends an average of NT$18 billion annually on
smoking-related illnesses.

The move to raise money for the national health-insurance program will
undoubtedly affect sales, manufacturers said.

The tax hike is expected to generate NT$6 billion in additional tax
revenue for the national health-insurance program.

Chan Shih-chu (=E8=A9=B9=E8=B3=9C=E5=B1=80), director of the tobacco depart=
ment at state-run
Taiwan Tobacco and Liquor Corp (TTL), said with the new rule
implemented, the health tax levied on a pack of cigarettes would rise to
at least NT$10, from the current NT$5.

"We believe the imposition of the double tax will be completely
reflected in the retail price and decrease tobacco sales," he said in a
phone interview.

Although it is hard to evaluate the new rule's impact, Chan, citing a US
study, said sales could slide by 3 percent to 5 percent for every 10
percent increase in price.

TTL, which has a 40 percent share of the local tobacco market, sold 1.7
million boxes of cigarettes last year, raking in over NT$26 billion in
revenues.

But the company has seen gross profits decline in recent years with
several anti-tobacco rules in place.

The Tobacco Hazards Act (=E8=8F=B8=E5=AE=B3=E9=98=B2=E6=B2=BB=E6=B3=95), fo=
r example, prohibits any
promotional activities for tobacco products, and Chan was noncommittal
when asked whether the firm would come up with any methods to offset the
new regulation's impact.