Lai See | Big tobacco firms fear high taxes the most

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."