Lai See

Big tobacco firms fear high taxes the most

PUBLISHED : Friday, 04 October, 2013, 12:00am
UPDATED : Friday, 04 October, 2013, 3:04am

The recent survey by Oxford Economics and the International Tax and Investment Centre (ITIC) has raised eyebrows among anti-smoking groups.

The survey claims 35.9 per cent of the cigarettes consumed in Hong Kong in 2012 were illicit and resulted in a loss of HK$3.3 billion in government revenues. The main drivers for this, ITIC said, "include very steep tax increases in 2009 and 2011, which led to a further widening of the price disparity of legal cigarettes with those in the neighbouring countries", which attracted the interest of criminal gangs.

But ITIC is hardly a detached observer in these matters. It is funded by international corporations, including all the big tobacco companies. The centre is involved in advising governments on the taxation of tobacco. Its advice is always for "moderate" taxes. But the evidence from the World Health Organisation and other bodies is that high taxation is the single most effective deterrent to smoking, particularly among children. This is recognised by the tobacco industry.

In recent years, millions of pages of internal tobacco company documents have been released as a result of litigation in the United States. A document from Philip Morris in 1985 notes: "Of all the concerns, there is one - taxation - that alarms us the most. While marketing restrictions and public and passive smoking do depress volume, in our experience taxation depresses it much more severely."


Cool Cathay Pacific

Something we've been anxiously waiting for. Cathay Pacific Airways yesterday unveiled its new range of long-haul business-class amenity kits. These, you will be pleased to know, feature products from Jurlique, the Australian skincare brand, such as Day Cream, Citrus Hand Cream and Lip Care Balm. Apparently, Cathay's general manager product Toby Smith is "very excited" by all this. The kits also include a disposable toothbrush and shoehorn.

These, you will be relieved to know, are mainly made from corn starch and cellulose, which are made from biodegradable, recyclable materials. This, we are told, demonstrates Cathay's "ongoing commitment to being a socially and environmentally responsible company". Bravo.


Slowdown in investment banking

Investment banking revenues for the first nine months in Asia-Pacific ex-Japan totalled US$6 billion, a decline of 19 per cent year on year, according to Dealogic data. It's the lowest figure for the nine-month period since 2009. For the entire Asia-Pacific region, Japan recorded the biggest revenues of about US$2.75 billion, followed by China and Australia. UBS led the Asia-Pacific ex-Japan ranking with US$371 million, followed by JP Morgan and Goldman Sachs.

Merger and acquisition volume was US$348 billion, up 3 per cent over last year, but the number of deals fell 9 per cent. Oil and gas remained the largest targeted sector for the region's outbound M&As with US$27.7 billion, although this was down 20 per cent from last year. Mainland China's acquisitions in Australia reached a record for the January-September period with US$9.9 billion, more than double the US$3.8 billion announced in 2012.

In debt capital market activity, offshore yuan volume stood at US$505 million through seven deals in the third quarter, the lowest quarterly volume achieved since the second quarter of 2010 when no deals were completed.


A blast from the past

The finance industry has been through considerable change over the past 10 years and has been publicly excoriated for its part in the financial crisis and its aftermath. So it's interesting to see what "old-school city types" had to say about the industry.

Take former senior banker and British government minister John Nott, who joined the industry in 1959. Writing about the City in a column for Financial News in 2002, he said: "For many of today's bankers, both their position in society and how they see themselves are entirely dictated by how much they earn. They are like battery hens, encapsulated by their place of work and by how many eggs they lay. This obsession with money for its own sake - something rather different to the creation of wealth - is quite offensive."

True, but clearly a blast from the past and doesn't chime with today's ethos.


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