Open Letter to Financial Secretary, Hong Kong SAR Government

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Open Letter to Financial Secretary, Hong Kong SAR Government 1 6 February 2018 Raising Tobacco Tax by 100% to Lower Smoking Prevalence and Achieve Tobacco Endgame in 2027 Hong Kong: Tobacco kills nearly 7,000, inflicts a loss of HK$5.6 billion annually, and its emissions have a detrimental effect upon the environment. Raising tax is the single best measure to reduce smoking, especially among youth, due to unaffordability. Tobacco tax has been frozen for 3 years, and cigarettes are now more affordable than even since 1991. Increasing tobacco tax does not lead to an increase in illicit trade. The public supports a tax increase, even smokers. If Hong Kong is to continue government efforts to reduce smoking to single figures, then increasing tobacco tax is the key policy. Each year, tobacco kills nearly 7 million people globally, including around 890,000 non-smokers caused by exposure to secondhand smoke. According to World Bank Group, smoking causes more deaths each year than HIV/AIDS, tuberculosis and malaria combined. Smoking is a leading global cause of preventable disease, while raising tobacco tax is the single most effective measure to reduce tobacco use and encourage smoking cessation. Research of The University of Hong Kong in 2011 found that smoking not only caused the loss of about 7,000 lives every year, but also incurred considerable medical expenses and loss of productivity with an annual economic loss of HK$5.6 billion. In addition, smoking produces 18 tonnes of toxic VOCs and hundred tonnes of toxic PM10 and PM2.5 in Hong Kong annually. A reduction in smoking prevalence would mean saving a significant number of lives, lowering the economic burden and reducing pollutants to the air. According to the research of World Health Organization (WHO) in high-income countries, a 10% price increase reduces overall tobacco consumption by 4%. However, tobacco tax in Hong Kong has been frozen for three consecutive years. The Government should raise tobacco tax substantially in FY2018-19 to maintain the price effect in reducing smoking prevalence and safeguarding public health, as well as protecting the environment. Inflation and Income Growth Outweigh Tobacco Tax Increases In the past two decades, tobacco tax in Hong Kong was raised in only 5 years. On the other hand, inflation and income keep increasing over time. Hence, tobacco products in Hong Kong become more affordable as the increase in tobacco tax or cigarette price does not keep pace with the increase of per capita income and consumer purchasing power. WHO recommends to raise tobacco tax to reduce the affordability of tobacco products. According to Dr Hana ROSS, a renowned expert in tobacco control economics, cigarettes in Hong Kong in 2015 were more affordable than those in 1991. In other words, the price of cigarettes in Hong Kong in 2015 was even lower than that in 1991 in real terms. Dr Ross

recommends Hong Kong to double the tobacco tax in order to make cigarettes less affordable and reduce demand on tobacco promptly. Cigarette Prices in Hong Kong are Low The cost per pack of cigarettes from major brands in Hong Kong is about HK$57. The retail price is relatively low when compared to other developed regions such as Australia (about HK$154), New Zealand (about HK$133), the United Kingdom (about HK$94), Canada (about HK$78) and Singapore (about HK$75). When comparing the affordability (i.e. price in real terms in relation to income and purchasing power) of cigarettes, many countries are ahead of Hong Kong, including Brazil, Canada, Indonesia, Malaysia, New Zealand, Philippines, Singapore, Thailand, United Kingdom and Vietnam. To keep in line with international standards, Hong Kong should increase tobacco tax by 100% to maintain the price effect, decrease the demand of tobacco products and discourage youth from picking up the smoking habit. Hong Kong Lags Behind in Tobacco Tax Policy The WHO Reports on the Global Tobacco Epidemic suggested that raising tobacco taxes to more than 75% of the retail price is the single most effective tobacco control intervention which costs little to implement but generates government revenues. According to the report in 2017, over 30 countries have now raised tobacco tax to more than 75% of the retail price and nearly 60 countries to more than 70%. On the contrary, tobacco tax of a pack of cigarettes in Hong Kong is about HK$38, which represents only about 67% of the retail price, a lower level than recommended by WHO. Many countries have adopted a long-term and continuous tobacco tax policy to lower smoking prevalence. For example, Australia set a 12.5% annual increase from 2013 to 2020; New Zealand implemented a 10% annual tax rise from 2012 to 2016 which brought about a reduction of tobacco consumption per capita by a quarter and motivated thousands of smokers to quit, with a further 10% annual increase to be implemented from 2017 to 2020. On the other hand, the United Kingdom committed to increase tobacco tax by at least 2% above retail price index from 2015 to 2020. Hong Kong should catch up with international practice by substantially increasing tobacco tax and developing a long-term tobacco tax policy in order to continuously curb the demand of tobacco and achieve tobacco endgame in Hong Kong by 2027. Motivate Smokers to Quit, Prevent Youth from Initiation Past experience in Hong Kong proves that raising tobacco tax substantially could trigger smokers motivation to quit and sustainably enhance their thought and determination to quit. Upon the announcement of tobacco tax increases in the Budgets of FY2009-10 (50%) and FY2011-12 (41.5%), the annual number of calls to the Integrated Smoking Cessation Hotline jumped by 258% and 49% respectively. These figures reflected the significant immediate and long-term impact on smoking cessation generated by a substantial tax increase. In contrast, when the tobacco tax was increased slightly by about 2

11.8% in FY2014-15, the annual number of calls to the hotline increased by 1% only. In FY2015-16 when tobacco tax was frozen, a drop of calls to the hotline was recorded. The World Bank Group has stressed that raising tobacco taxes can increase prices, reduce affordability and hence, prevent initiation among youth. According to the Schoolbased Survey on Smoking conducted in 2008, 2011 and 2013 by the School of Public Health of The University of Hong Kong (HKU), smoking among adolescents had dropped from 6.9% in 2008 to 3.4% in 2010 after the 2009 tobacco tax increase and to 3.0% in 2012 after the 2011 increase. This adds up to 13,000 and 3,000 adolescents who quitted smoking or were prevented from taking smoking up in 2010 and 2012 respectively. The Thematic Household Survey Report No.59 found that nearly 70% of smokers started smoking weekly before 19 years old. To make smoking more attractive to youth, the tobacco industry has been pouring trillions of dollars to develop novel tobacco products and marketing strategies which may mislead the public that the products are healthier, safer and less harmful. Therefore, the Government should raise tobacco tax substantially to motivate smokers to quit and prevent youth from initiating any forms of smoking. No Causal Relationship with Illicit Cigarettes WHO reiterates that there is no causal relationship between tobacco tax and illicit cigarettes. Overwhelming local and overseas evidence has proved the effectiveness and confirmed the justifications for heavy tobacco tax. To counter and oppose effective tobacco control measures, the tobacco industry uses skewed and distorted information to exaggerate the situation and link tobacco tax with illicit cigarettes. Policy-makers and the public should be particularly cautious about such information released by the tobacco industry and their affiliated groups, such as the tobacco-industry funded Foundation for a Smokefree World, International Tax and Investment Centre and Oxford Economics. COSH and HKU have conducted an objective estimation on Hong Kong s illicit cigarette consumption with reliable data from various Government departments. The accurate consumption rate of illicit cigarettes in Hong Kong in 2012 should range from 8.2% to 15.4% of total cigarette consumption, similar to the global average. According to the statement of Hong Kong Customs & Excise Department in the Legislative Council meeting on 8 April 2011 (LC Paper No. CB(2)1419/10-11(01)), there was no sign that the situation in respect of the illicit cigarette market had deteriorated as a result of the increase in tobacco duty rates. Public Support for Increasing Tobacco Tax and Cigarette Price According to COSH s Tobacco Control Policy-related Survey 2017, 80.7% of all respondents supported raising tobacco tax in 2018, while 31.1% of the current smokers also supported this measure. Meanwhile, over 70% of the respondents supported an annual tobacco tax increase in Hong Kong. Furthermore, nearly 60% of current smokers said that if the tobacco retail price increases, they would either quit smoking or reduce smoking by half. Current smokers also commented that the cigarette retail price should be set at a median price of HK$100 (current retail price is $57) to effectively motivate smokers to quit. The mean price for motivating smoking cessation suggested by current smokers was HK$293. Given the big room for cigarette price increase, the Government should 3

substantially increase tobacco tax in order to lift up the cigarette price, decrease tobacco affordability, effectively motivate smokers to quit, and deter youth from starting to smoke. A 100% increase in tobacco tax would signify increasing the tax value from about $38 to about $76 per pack, making the price similar to the median suggested by current smokers. Major Determinants towards a Single Digit Percentage Smoking Prevalence and 2027 Tobacco Endgame Plan in Hong Kong Raising tobacco tax is the most effective measure to encourage smokers to quit and deter youth from smoking. According to the Smoking-related deaths averted due to three years policy progress published by WHO in 2013, raising tobacco tax was the most effective policy among all other measures in reducing the number of smokers and smokingattributional deaths in the world from 2007 to 2010. In 2015, the smoking prevalence in Hong Kong was 10.5%. Having one of the lowest smoking prevalences in the world, Hong Kong should strengthen its policy on raising tobacco tax in order to further lower the smoking prevalence to a single digit percentage as soon as possible, and to 5% or below in 2027 in order to leap towards a tobacco endgame. Apart from raising tobacco tax, the Government should also formulate a comprehensive plan in order to achieve the above goals and realize a smoke-free Hong Kong so as to protect public health, including the implementation of plain packaging, banning all tobacco product display at points of sale, extension of smoke-free areas, placing legal onus on venue managers who should be liable for smoking offences, increasing the legal tobacco sales age to 21 and the total ban on e-cigarettes, the regulation of emerging tobacco products, tightened enforcement, as well as allocation of more resources for smoking cessation services and smoke-free education. We strongly urge the Government to raise tobacco tax by 100% in FY2018-19 so as to effectively encourage smokers to quit, to deter the youth from picking up the habit, to lower the smoking prevalence to a single digit percentage promptly and to 5% or below in 2027 in order to achieve tobacco endgame. c.c. to: Chief Executive, HKSAR Government Secretary for Food and Health, HKSAR Government Director of Health, HKSAR Government Members of Legislative Council, HKSAR 4