Advocacy group warns that the HK$2.9 billion tax loss from illicit tobacco consumption in 2015 could be used to fund other organised crimes.
From left: Patrick Wong, Mick Gordon and Jeff Herbert
A Hong Kong-based advocacy group has urged the government to step up enforcement against illicit tobacco trade while warning against measures that may jeopardise the positive trend.
Pollster Ipsos Hong Kong released in January a survey report on public perception of the black market cigarette trade. Commissioned by the Hong Kong United Against Illicit Trade (HKUAIT), the report interviewed about a thousand Hong Kong adult citizens in December 2016. Results show that 84% of the respondents take illicit cigarettes as a serious issue in Hong Kong.
Ipsos Director Mick Gordon highlighted that approximately three out of four respondents attribute the problem to sophisticated criminal networks, insufficient penalties and drastic excessive tax increases on cigarettes.
According to the latest Asia Illicit Tobacco Indicator 2015 report by Oxford Economics, Hong Kong’s illicit incidence has fallen by 6.7% since 2012 but remains at a relatively high level at 29.1%, amounting an estimated HK$2.9 billion tax loss in fiscal year 2015/16.
Don’t ruin it
While acknowledging Hong Kong Customs and Excise Department’s effort in combating illicit tobacco trade, HKUAIT advisor Jeff Herbert warned that the tax loss could in turn, fund criminal organisations and generate even greater indirect losses in terms of extra enforcement actions and prosecutions. Mr Herbert called for increased penalties, greater enforcement, public education and sensible tax rises amid negative factors such as ever rising costs of living and proximity to the mainland counterfeit market where about 60% of these cigarettes were transported from through land routes.
Meanwhile, Patrick Wong, Executive Director of HKUAIT, expressed concerns over a recent legislative proposal by the government to enlarge the size of health warnings on tobacco products from 50% to 85%, arguing that such a move would further reduce available space for tobacco manufacturers to print security and authentication features, resulting in a less secure supply chain which could facilitate illicit trade.
The LegCo Panel on Health Services will hold a special meeting to discuss the government’s proposal on 17 January, 2017.
“We’ve got to be very wary of doing anything that can aggravate trade and also the high risk of reversing what we have seen as a downward trend. The 85% graphic health warning which some people are advocating would only further cause market to deteriorate as it would be much easier to counterfeit the outside packaging,” Mr Herbert echoed.