Social Irresponsibility of tobacco industry
Published on December 23, 2013 · No Comments- By Manjari Peiris
According to the research in Sri Lanka there is a clear co-relationship between prices and smoking – when price is increased by 10 percent, consumption drops by 5 percent.
Recently newspapers reported that the tobacco industry in Sri Lanka was placed fourth among the top 25 Corporates by Business Today Top 25 Awards.
It was mentioned that it has contributed significant revenue to the nation, acted responsibly towards the people, environment and the country. Their consistent and substantial investment in social and economic advancement of rural communities was also highly praised and recognized.
The Corporate Social Responsibility (CSR) Program of the tobacco industry to make Sri Lankan families economically independent through sustainable home gardening and animal husbandry practices too was mentioned. According to them it has impacted on over 16,000 families benefitting over 60,000 people in Sri Lanka.
While such accolades are being showered on the tobacco industry in Sri Lanka, it would be worthwhile to probe some other disturbing facts.
Over 60 persons a day die in their productive years due to tobacco related diseases. Tobacco smoking is one of the biggest causes of all deaths and disabilities from non-communicable diseases in Sri Lanka as NATA revealed in 2009.
Twenty-two percent of the total health budget is spent in treating tobacco victims. Indirect costs are enormous – people die in their productive years which are a loss to the country and families (economic and social loss).
Sri Lanka is a signatory to the Framework Convention on Tobacco Control (FCTC) of the WHO, an international treaty focusing on tobacco control.
Thus Sri Lanka government implemented Article 13 of the FCTC in 2006, prohibiting advertising, promotion and sponsorship of tobacco products.
The FCTC guidelines on the Corporate Social Responsibility are very explicit. They say that: -
“It is increasingly common for tobacco companies to seek to portray themselves as good corporate citizens by making contributions to deserving causes or by otherwise promoting “socially responsible” elements of their business practices.”
Some tobacco companies make financial or in-kind contributions to organizations, such as community, health, welfare or environmental organizations, either directly or through other entities. Such contributions fall within the definition of tobacco sponsorship in Article 1(g) of the Convention and should be prohibited as part of a comprehensive ban, because the aim, effect or likely effect of such a contribution is to promote a tobacco product or tobacco use either directly or indirectly.
Tobacco companies may also seek to engage in “socially responsible” business practices (such as good employee-employer relations or environmental stewardship), which do not involve contributions to other parties. Promotion to the public of such otherwise commendable activities should be prohibited, as their aim, effect or likely effect is to promote a tobacco product or tobacco use either directly or indirectly. Public dissemination of such information should be prohibited, except for the purposes of required corporate reporting (such as annual reports) or necessary business administration (e.g. for recruitment purposes and communications with suppliers).
The guidelines further recommend that The government should ban contributions from tobacco companies to any other entity for “socially responsible causes”, as this is a form of sponsorship.
Publicity given to “socially responsible” business practices of the tobacco industry should be banned, as it constitutes advertising and promotion.
The newspaper article also highlighted that contributing factors towards tobacco industry’s high ranking this year are its operational excellence, contribution to the economy and steady financial performance, which also resulted in them becoming the largest industry quoted on the Colombo Stock Exchange earlier this year.
Most of the policy makers, politicians, legislators and certain people from the public believe that the government receives a huge portion of its total revenue from the tobacco company. The simple truth is that only 5.4 percent of the total revenue that the government is receiving comes from tobacco (Central Bank Report 2011).
“Samurdhi” is a poverty alleviation program in Sri Lanka. While yearly rupees 8,400 million have been spent by the government for this program, the Samurdhi beneficiaries have spent rupees 18,250 million only for cigarette smoking (source: Ministry of Samurdhi on WNTD 2002). One may wonder how it happened – the simple truth is that cigarettes drag smokers from bad to worse. Does this so-called “revenue from tobacco” develop individuals, community or a country?
According to the guidelines for implementation of Article 6 of the FCTC – which is Tax on cigarettes, Parties to the FCTC should take into account – among other things – both price elasticity and income elasticity of demand, as well as inflation and changes in household income, to make tobacco products less affordable over time in order to reduce consumption and prevalence.
Therefore, Parties should consider having regular (automatic) adjustment processes or procedures for periodic revaluation of tobacco tax levels.
Parties should implement the simplest and most efficient system that meets their health and fiscal needs, with the fewest exceptions and taking into account their national circumstances. From a budgetary as well as a health point of view, Parties should implement specific or mixed excise systems with a minimum specific tax floor, as these systems have considerable advantages over purely ad valorem systems.
Parties should establish coherent long-term policies on their tobacco taxation structure including targets for their tax rates, in order to achieve their objectives within a certain period of time. Tax rates should be monitored and increased on a regular (potentially annual) basis in order to take into account inflation and income growth developments.
Regional particularities (e.g. cross-border trade) should be taken into account when formulating these policies.
In order to avoid negative consequences, such as product substitution or an increase in illicit trade as well as to ensure that health objectives are met, all tobacco products should be taxed in a comparable way, where appropriate with a similar tax burden, and should be accompanied by strong policies and measures against illicit trade in tobacco products.
Parties should ensure that tax systems are designed in a way that does not encourage users to shift to cheaper products in the same product category or to cheaper tobacco product categories as a response
A recent study findings of W.D.Aruna Shantha de Silva of the National Poison Centre of Malaysia, University of Sains, Malaysia, Penang, Malaysia and Ministry of Health, Sri Lanka, appearing in Asia Pacific Journal of Medical Technology in December 2012 states – Quote” The prevalence of smoking among males is 29.9 percent and among females is 0.4 percent in Sri Lanka. The prevalence of smoking any tobacco product among adults over 15 years was 32.4 percent and among females was 2.1 percent in Sri Lanka, in 2006. Recent study by Katulanda et.al. reveales that the prevalence of smoking among males was 38 percent and among females was 0.1 percent. The highest prevalence of tobacco smoking (44.6 percent) was found in 20-29 age groups, while the adolescents less than 20 years had the lowest prevalence (15.6 percent). Moreover, they found that smoking was commonly associated with lower income and lower education. Among adolescents aged 13 to 15 years in Sri Lanka, the prevalence of current tobacco use is 15.7 percent among males and 5.4 percent among females.
In Sri Lanka, 65.9 percent of youth (13-15 years old) are exposed to secondhand smoke in public places. A significant high particulate level due to secondhand smoking in indoor public places was detected in Sri Lanka by Lee et al. Meanwhile, in 2011, it was reported that 35.4 percent youth were exposed to secondhand smoke in home.” Unquote.
A few years ago Verite Research Executive Director, Dr. Nishan de Mel pointed out that if the gap between income levels and taxes on cigarettes had been bridged by the government would have earned Rs. 100 billion.
According to a research on tobacco taxation in Sri Lanka, the price of a cigarette had not increased according to the income level in the country. If the gap is bridged today the government will earn revenue of Rs. 16 billion every year.
The researchers pointed out that a 50 percent price increase on cigarettes is needed from 2009 onwards to correct the past lapses in affordability adjustments.
Economist Dr. de Mel points out that tax on cigarettes should be increased gradually in keeping with the income levels of people in the country. Increasing the prices of certain brands will encourage people to use cheaper brands which could be more harmful to health; hence prices of cigarettes should be increased across the board.
According to the research in Sri Lanka there is a clear co-relationship between prices and smoking – when price is increased by 10 percent, consumption drops by 5 percent. When Sri Lanka has imposed Article 13 of the FCTC – which is prohibition of tobacco advertising, promotion and sponsorship which includes CSR, it is indeed surprising that the tobacco industry still continues with the CSR activities and receives awards for them.
Therefore it is necessary that the government considers including CSR in the NATA Act and fully implement WHO FCTC guidelines on tobacco advertising, promotion and sponsorship, before considering them for Awards!
It is a shame when an industry receives an award for their so called ‘corporate social responsibility’ and as a corporate contributing significant revenue to the nation, while the same industry which produces and sells to around 31 percent (males and females) of our population, a product which if used as intended causes death, disease and suffering which is many times a disaster, harmful and loss to the country.
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