Posted by: Frederik Balfour on May 3, 2009
At first glance, the move by Macao authorities to increase the excise tax on cigarettes by 300% sounds like a big victory for health advocates. The Framework Convention for Tobacco Control, an alliance of countries which have signed an accord under the World Health Organization, believe strongly that higher excise taxes can be an effective means of reducing cigarette consumption. The decision by Macao, which has not yet been ratified, is all the more laudable because the territory relies on gambling levies for virtually all its tax revenues, so increasing taxes on gaspers isn’t motivated by fiscal concerns. Unlike Indonesia, where the cigarette industry provides a huge source of revenue to the government and is thus reluctant to anger big tobacco, Macao has no domestic production. Furthermore, more than half the visitors to Macao come from mainland China, most of whom come armed with packs of gaspers bought at home.
However if the Macao authorities are truly sincere about reducing smoking, they should follow the lead of some states in the U.S. including Colorado and Illinois, [though not yet Nevada, home of Las Vegas]by imposing a ban on smoking inside casinos. When I visited several properties in Macao a couple of weeks ago, including gambling joints owned by local kingpin Stanley Ho, and big boys of Vegas Sheldon Adelson and Steve Wynn as well as MGM Mirage, I saw people puffing at virtually every baccarat table. It felt like a scene from the original 1960 film, Ocean’s Eleven.
Meanwhile, I saw some encouraging news out of Japan. Bloomberg reports that Japan Tobacco, the world’s third largest cigarette maker, which makes Camel and Mild Seven brands, has forecast its profit will fall 19% for the year ending March 2010. However profit will still reach $1 billion, which is pretty depressing when you consider all cigarette makers sell products known to lead to mortal disease. The declining profits in JT reflect declining rates of smoking in Japan.
However as my colleague Nanette Byrnes and I wrote in a BusinessWeek cover story last week, falling rates of smoking in the U.S. is the big reason Philip Morris International is making an aggressive push into emerging markets where the anti smoking lobbies are less powerful than at home. One of its biggest potential markets is China, where last year it got a license to produce Marlboros.