THE tobacco business may have long stood as a target for Government to rake in extra dollars into its coffers.

But as the health ministry moves to implement legislation that complies with the international treaty aimed at controlling tobacco usage, the Government will have to conduct a balancing act that helps it secure revenue that equates to a third of tax dollars earned from all companies in Jamaica, while Carreras — the primary distributor and marketer of cigarettes in the country — plans to aggressively lobby for “balanced, fair and practical” legislation.

In just three years, the Government has increased the specific tax on cigarettes by 450 per cent — from $2.30 a stick in March 2007 to $10.50 in January of this year — which positions the cigarette business to generate some $11 billion, or approximately four per cent of the tax revenue for the Government in the 2010/11 fiscal year.

The tax increases have translated into lower sales for Carreras, with the company seeing a 27.5 per cent decline in volumes during its financial year that ended March 31, 2010 — a decline which outweighs increase in revenue such that overall gross operating revenue fell by 4.9 per cent.

Now, with recent indications by the minister of health to move towards implementing legislation akin to that of Trinidad and Tobago’s tobacco control legislation partially proclaimed in February, Carreras says it “has embarked upon an extensive engagement process with critical stakeholders to ensure that any legislation that is passed is balanced, fair and practical”.

The Government has already signed and ratified the Framework Convention on Tobacco Control (FCTC), and “has been under increasing pressure, particularly in recent times, to enact some form of tobacco control legislation in keeping with its FCTC obligations”, according to Carreras in its 2010 annual report.

Trinidad and Tobago’s legislation at first glance resembles convention that currently obtains in Jamaica, but the Tobacco Control Act states that “no person shall smoke or hold a lighted tobacco product in any enclosed public place”, among other designated areas, making it illegal to smoke in the many bars and clubs that dot the island’s landscape.

“The company has also been working internally as well, to prepare and sensitise the overall team of the impending developments in the regulatory environment, and the implications it will have for the business and its operations,” said Carreras, even though the cigarette distributor maintains that it “has over the years, held the highest standards reflecting a responsible approach to the marketing and distribution of cigarettes in Jamaica”.

“In fact, the company has over the years instituted self-regulatory voluntary marketing standards which have seen us, among other things: voluntarily ceasing advertisement in all media (print, electronic and audio) in December 2002; removal of all billboards from the Jamaican market effective December 31, 2005; withdrawal from the Carreras Sports Foundation in January 2005 given the controversial nature of the product and its association with sporting events; implemented the new Health Warning requirement six months before the date of official gazetting in 2006; and undertaking an active Youth Smoking Prevention Campaign to ensure that our activities, and the people to whom we sell, do not engage in activities that appeal to, or target children,” said Carreras’ annual report.

In the meantime, Carreras says its long-term sustainability “continues to be threatened by frequent and excessive levels of taxation, which impacts its financial performance and the ability of its consumers to afford its brands”.

“There are three key areas of our strategy that seeks to address this: Continuous evaluation of our portfolio to consider the feasibility of lower priced offers; continued engagement with tax authorities in an effort to manage the levels and frequency of tobacco tax increases; aggressive management of illicit trade in cigarettes and other tobacco products that deprive the government of tax revenues and via evasion of taxes are able to provide market and distribute relatively cheap cigarettes; and other key elements of our strategy include building our trade marketing and distribution (TMD) capabilities and increasing TMD resources to support the changing dynamics of our business.”