Govt losing tax $ to ‘bad smoke’

ALTHOUGH the West Indian Tobacco Company (Witco) recorded a handsome profit of $405.1 million last December, the illicit tobacco trade continues to affect its operations, managing director Jean Pierre du Coudray told shareholders during Witco’s annual general meeting at the Hyatt Regency Hotel in Port of Spain yesterday.

He elaborated on his statement to reporters after the meeting.

Du Coudray said it was difficult to measure the impact of the trade, but he estimated the share of the illicit trade could be as much as ten per cent, claiming this was “a lot higher than it was three years ago.”

From a loss perspective from government revenue, du Coudray said, “You are talking $25 to $30 million in taxes.” He said these were just excise taxes, so if value added tax and extra Caricom duties were factored in, “It could get up to $40 or $50 million.”

From an industry perspective, du Coudray said, “You are talking about maybe the same amount, $50 million in profit being impacted.”

He said Witco hoped that this year “we can get together with all the key stakeholders who agree there is a problem and try to come up with a solution to put measures in place.” The stakeholders Witco has spoken to include Health Minister Terrence Deyalsingh and Police Commissioner Gary Griffith.

Du Coudray later told Newsday that Vietnam, China and India are three countries that the illicit tobacco are coming from. He said no one knew who the importers were because they were operating under the radar. But du Coudray sad the price point of the illicit tobacco could identify where it was being sold. While Witco’s Du Maurier brand sells for $29 per pack, the illicit tobacco sells for $8 per pack.

He said the tobacco was totally non-compliant with TT’s laws. The packages lack the licensing information, health warnings and sometimes the labelling is in Chinese. Du Coudray applauded Government for recognising there was a problem with illicit tobacco. As a member of British American Tobacco (BAT), du Coudray said Witco operated in several other countries. He explained that, in those countries, there had been successful efforts by the authorities to clamp down on the trade.

While there are some protocols which are being looked at, du Coudray said he could not discuss them for security reasons and any proposals he mentioned might not be the eventual solution. The nature of Witco’s products and the amount of these products that are on the road daily, du Coudray continued, had resulted in extra security measures being put in place which had substantially increased Witco’s security costs. The increase in criminal activities in 2018 has significantly intensified the need for greater resources to protect the security of the business operations of Witco’s key stakeholders, he said, but that is “a necessary evil” and Witco will not put its people or products at risk. He estimated the increase in security costs could be approximately 20 per cent.

Du Coudray said Witco was not anticipating an increase in tobacco taxes when Finance Minister Colm Imbert presents the mid-year review. He recalled that when tobacco excise taxes were increased in 2016, less revenue was collected in 2017, and attributed this to an increase in the illicit tobacco trade.

In last year’s budget presentation, he recalled, Imbert acknowledged diminishing returns from tobacco and alcohol taxes.

He welcomed any measure to increase revenue from tobacco and said one way to generate that revenue would be to “great get rid of the illicit trade and start to collect money on those cigarettes coming into the market,” arguing that this “will bring in more money than any other excise increase would bring in right now.”