RECOMMENDATION 7

DO NOT GIVE PREFERENTIAL TREATMENT TO THE TOBACCO INDUSTRY

Regardless of whether the tobacco industry is owned by the government or not, all the recommendations should apply in the same manner. In a way, having a state-owned tobacco industry makes it easier for the government to regulate it in accordance with the obligations embodied in WHO FCTC Article 5.3 and its Guidelines. For instance, depending on the level of control the government has over the tobacco industry, many of the measures listed in this Toolkit, such as the requirement of making certain information available, can be adopted through well-disseminated inter-governmental policies. In addition,  governments with a state-owned tobacco industry may focus on some distinct measures that need further consideration:

a. Remove tax exemptions or benefits that accrue to government entities. Most governments exempt government entities or corporations from certain taxes. The state-owned tobacco industry should be specifically excluded from this, because this provides undue benefit to the industry and is not consistent with the commitment to promote alternative livelihoods under Articles 17 and 18 of the WHO FCTC.

b. Adopt a policy to ensure that the state-owned tobacco industry does not undertake any so-called CSR activities and remits any excess money to the government, either as taxes or as part of the revenue stream, which may be earmarked for health promotion purposes.

c. Require the state-owned tobacco industry to set up a publicly accessible database of its transactions and operations in order to ensure transparency of information that is relevant to implementing tobacco control policies.

d. Establish internal arrangements in government to create an environment where the influence and authority of the state-owned tobacco industry and its personnel, in relation to other government entities, are minimized or limited.

NO PREFERENTIAL TREATMENT FOR THE TOBACCO INDUSTRY

Article 5.3 Guidelines recommend not giving benefits and preferential treatment to the tobacco industry. Giving fiscal benefits and/or preferential treatment to the tobacco industry is tantamount to assisting it in promoting its deadly products. Not giving benefits that have monetary value creates an opportunity to decrease government spending. The savings can then be used for developmental activities. Below are some of the most common forms of incentives enjoyed by the tobacco industry in the region.

A. TAXES (DUTY FREE AND TAX HOLIDAYS)

There is no official global report on the amount of tax incentives being enjoyed by the tobacco industry across the world. Advocates in the region do not have access to such information. It is important to include such information in the monitoring of tobacco industry activities in order to regulate the same. In Laos, certain tobacco companies, as part of investment incentives, enjoy a 25-year tax cap. There are reports that certain countries in the region have considered removing duty-free privileges of tobacco products and have started computing their savings.

B. AGRICULTURAL SUBSIDIES

In some countries, tobacco enjoys some forms of direct or indirect subsidy from the government. Such practices continue despite the commitment of governments to promote alternative livelihood under the FCTC’s Article 17. The lack of access to information on the extent of subsidies provided to farming poses a great challenge in the ability to remove and divert them to promoting alternative livelihood. As a means of reducing support for tobacco export, the US Doggett Amendment prohibits government funds from being used to promote the export and sale of tobacco including agricultural subsidies and programs.

C. INVESTMENT INCENTIVES

Investment incentives come in many forms. Common forms include tax incentives, including real property or income tax to reduce cost of rent and access to ports. The Philip Morris regional warehouse in Subic is housed in an investment zone that extends a 5-year tax holiday and reduced leasing costs, among others.

D. TRADE AND INVESTMENT AGREEMENTS

Trade and investment agreements innately provide benefits to businesses and foreign investors. Contemporary trade and investment treaties provide even more incentives and benefits than traditional ones. Malaysia initiated a proposal to carve out tobacco from the modern free trade and investment agreement in the Asia-Pacific region, the Trans-Pacific Partnership Agreement. The lobby of the tobacco industry and compromises in negotiations led to a “partial carve-out,” or a provision that could limit the tobacco industry’s access to investor-state suits (i.e., limit the ability of tobacco companies to use the dispute settlement mechanisms of the treaty against the state to challenge tobacco control measures.)

E. TREATMENT

The influence and demands of the tobacco industry have led governments to grant it preferential treatment. One example is the way that the tobacco industry has used embassies and diplomatic missions to promote its product in foreign countries in the context of free trade. This practice has led to outrage among advocates in Thailand and the United States, which led to the development of the Doggett Amendment and EO 13193. The EO 13193 prohibits government agencies and personnel, including in embassies, to be an instrument in promoting the sale and export of tobacco, or in undermining tobacco control measures of foreign countries.

F. INVESTMENT PORTFOLIOS

In developed countries, initiatives in removing tobacco from governments’ investment portfolios have began. Pension funds in Australia, Hong Kong, and the US have removed tobacco company investments from their portfolios. Reports state that in Australia alone, more than 30 superannuation funds have adopted tobacco-free mandates resulting in divestment of AUD 1.3 billion.

tobaccodivestment
An advocacy on socially responsible investments tracks the divestment of tobacco  stock holdings of public and private organizations.

tobacco-free-portfolios

Initiatives of non-government organizations are critical in encouraging governments to remove investments from tobacco companies. According to Tobacco Free Portfolio, the divestment of tobacco stocks in Australia have been justified based on a range of factors including Australia being a signatory to the WHO FCTC, the long-term regulatory risk, litigation risk, reputation risk, baseline ethical expectations, as well as human rights abuse in tobacco production.


policiesPOLICY TO ENSURE NON-PROMOTION OF TOBACCO AND THE PARTICIPATION OF HEALTH OFFICIALS IN TRADE POLICY

In 2001, the US issued Executive Order 13193, a policy to ensure that the health ministry is involved in trade negotiation positions. The policy also ensures that embassies and diplomatic missions are not used by tobacco companies to promote their products and to undermine tobacco control regulations in foreign countries.

templateSAMPLEExecutive Order 13193 of January 18, 2001. Federal Leadership on Global Tobacco Control and Prevention

 

 

policiesPOLICY TO ENSURE THAT NO SUPPORT IS GIVEN TO TOBACCO INDUSTRY INVESTMENTS AND SO-CALLED CSR

In 2014, UK issued revised guidelines for overseas posts on support to the tobacco industry, which provide clear guidance on how personnel of diplomatic missions should behave to ensure that the tobacco industry is not given benefits or preferential treatment. The guidelines clearly outline that such personnel should not encourage investments in the tobacco industry, and provide a duty on the part of public officials to verify linkages of an organization with the tobacco industry.

templateSAMPLE: United Kingdom’s revised guidelines for overseas posts on support to the tobacco industry (pdf)

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