GlobalTobaccoEconomy-2009

7/31/2019 GlobalTobaccoEconomy-2009

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Fut ur e Opt ions fo r Tobacco Cont ro l

THE GLOBAL TOBACCOECONOMYA SNAPSHOT OF THE ECONOM I ES OF

MULTI NATI ONAL TOBACCO COMPANI ES

AND OF I NTERNATI ONAL TOBACCO

CONTROL EFFORTS I N 2 0 0 8 .

Se p t e m b e r 2 0 0 9

Physicians Smoke-Free Canada

1226 A We l l i ng t on St ree t O t t aw a , On t a r i o , K1Y 3A1

w w w . sm oke - f ree . ca psc@smok e - f ree .ca


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ExecutiveSummary

Theuseoftobaccoaroundtheworldisincreasinglyrecognizedasaglobalizedphenomenon.Thebusinessforces

whichfuel

tobacco

use

have

garnered

strength

from

the

economic,

cultural

and

trade

dimensions

of

globalization

topenetratenewmarketsandtohomogenizetheirbrandsandproducts.Nationshaverespondedbyestablishing

aglobalizedtobaccocontrolsystemintheformoftheFrameworkConventiononTobaccoControl,butresources

appliedtoimplementthisglobalizedpublichealthinstrumentremainmodest.

Thefinancingoftobaccocontrolismostlyindependentoftheeconomicsofthetobaccomarket. Revenuesfrom

tobaccosalesthatflowtogovernment,eitherintheformofexciseorcorporateincometax,orintheformof

revenuesfromtheirownershipintobaccocompanies,arenotusuallyfactoredintothebudgetsofgovernment

effortstoreducetobaccouse.Canadaisperhapsuniqueinapplyingahealthsurtaxontobaccoindustryprofits,

butthisadditionalrevenueisnotovertlylinkedtotobaccocontrolbudgets.

Theglobalizationofthetobaccomarkethasresultedinsignificanttransnationaltransfersofrevenuesfrom

tobaccosales.

The

globalization

of

tobacco

control,

in

the

form

of

the

FCTC,

has

not

yet

resulted

in

significant

transnationaltransfersofrevenuestosupporttobaccocontrolefforts.

NOTESTOREADERABOUTINFORMATIONSOURCES

Thedatapresentedinthispapercomefromavarietyofindustryandtradesources,suchascorporateannual

reports,investorpresentations,articlesinthetradepress,etc.Thesesourcespresentaconsistentpictureabout

theeconomicsofthetobaccomarket,buttheyoftendifferintheirexactmeasurements. Thiscouldresultfrom

differencesintheirmethodologies,orintheperiodtheyreviewed,orfromothercauses.

Despitethesevariations,webelievethattheinformationpresentedbelowgenerallydescribesthetobaccomarket

anditseconomyintheperiodreviewed(20072008).Forfurtherinformationondatasources,pleasecontactthe

authors.

NOTESTOREADERABOUTEXCHANGERATES

Themajorcompaniesreviewedinthisstudyreporttheirearningsintheirlocalcurrencies:BritishAmerican

TobaccoandImperialTobaccoGroupreporttheirfinancialstatementsinBritishPounds,JapanTobacco

IncorporatedreportsinJapaneseYen(butprovidesequivalentU.S.dollars),andPhilipMorrisandAltriareportin

U.S.dollars.

Forconvenienceandcomparability,allfigureshavebeentranslatedintoU.S.dollarsattherateoftheendofthe

fiscalperiodreported.

Thismethodisthemostaccurateavailable,butnonethelesscreatessomedistortions,asthereweresignificant

shiftsinexchangeratesinallcurrenciesasaresultofthemarketcollapseandthestepstakenbygovernmentsto

addressthefinancialcrisisduringtheperiodreviewed. TheBritishpound,forexample,tradedat1.7802at

September30,2008(thefiscalyearendforImperialTobaccogroupInc),butfellto1.4614byDecember31,2008

(thefiscalyearendforBritishAmericanTobacco).


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TableofContentsExecutiveSummary.................................................................................................................................. 3

Notestoreaderaboutinformationsources............................................................................................ 3

Notestoreaderaboutexchangerates.................................................................................................... 3

1.Aroundtheworld,ahandfulofglobalizedtobaccocompaniescontrolvirtuallyalltobaccosales.1

Figure1.1:MergersandAcquisitionsamongstmajortobaccocompanies............................................. 2

Table1.1:GlobalMarketShareofMajorTobaccoCompanies............................................................... 3

Figures1.3: GlobalMarketShareofMajorTobaccoCompaniesbyregion........................................... 4

Figure1.4: Globalsalesandmarketshareofleadingcigarettebrands.................................................. 4

2.Repatriatedprofitsresultinthetransnationaltransferoflargesumsofmoney........................... 5

Table2.1Marketsharesinmajormarkets(billionsofcigarettes) .................................................. 6

Figure2.2:Repatriationofprofitsfromthesaleofmanufacturedtobaccoproductsacrossnational

boundariestocorporateheadoffices,2008........................................................................................... 7

3.ACloserLookatthefinancialstatementsofthemajorcompanies.................................................. 8

Table3.1: FinancialIndicators,PhilipMorrisInternationalandAltria .................................................. 8

Table3.2: PhilipMorrisInternationalSalesandRevenuesbyRegion. .................................................. 9

Table3.3: KeyFinancialIndicators,BritishAmericanTobacco(BAT) ................................................. 10

Table3.4: BATearningsfromcigarettesalesbyregion ..................................................................... 11

Table3.5: KeyFinancialIndicators,ImperialTobaccoGroupPLC(ITG) .............................................. 12

Table3.6: imperialtobaccogroupearningsfromcigarettesalesbyregion ....................................... 13

Table3.7: KeyFinancialIndicators,JapanTobacco.............................................................................. 14

Table3.8:JapanTobaccoInternationalSalesbyregion ...................................................................... 15

Table3.9: SalesbyStateownedTobaccocompaniesinChina............................................................ 16

Table3.10: KT&GFinancialIndicators................................................................................................. 16

Table3.11: SalesbyThaiTobaccoMonopoly ...................................................................................... 17

Table3.12: KeyFinancialIndicators,Lorillard....................................................................................... 18

Table3.13: KeyFinancialIndicators,ReynoldsAmericanInc............................................................... 18

Table3.14: KeyFinancialIndicators,Swedishmatch........................................................................... 19

Table3.15:RevenuesofEasternCompanySAE..................................................................................... 19

4.Governmentssharemorethan$160billioninannualrevenuefromonly9tobaccocompanies.20

Table4.1:GovernmentrevenuesforExciseandIncomeTaxesfromtobaccosales,selected

companies.............................................................................................................................................. 21

Table

4.2a

:

Tobacco

Holdings

of

the

Caisse

de

dpt

et

de

placement

du

Qubec,

as

of

December

31,

2008,estimatedvalueofdividendsreceivedfromtobaccosalesbasedonthoseholdings.................22

Table4.2b:TobaccoHoldingsoftheCanadaPensionPlanInvestmentBoardasofMarch31,2009

andestimatedvalueofdividendsreceivedfromtobaccosales............................................................ 23


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5.Governmentexpendituresontobaccocontrolareasmallfractionoftherevenuestheyreceivefromtobaccosales................................................................................................................................ 24

Table5.1: Theoverallnationalbudgetfortobaccocontrolactivities,asreportedtotheWorldHealth

Organizationandtheofferingorreceiptofinternationalassistancefortobaccocontrol...................25

Table5.2:FCTCpartyreportsmadepublicbyMay1,2009.................................................................. 29

Figure

5.1:

Phase

1

reporting

tools:

questions

on

technical

and

financial

assistance.

.........................

29

6.Tobaccocontrolisunderfundedcomparedwithotherpreventablediseases............................... 30

Table6.1: Estimatedmortalityfromselecteddiseasesorcausesofdeath. 2005,2015and2030.....31

Table6.2: Estimatedglobalfinancialaidfortheavoidanceofdeathbyselecteddiseasesorcausesof

death. ................................................................................................................................................... 31

Table6.3: GlobalHealthFundingbyChannelofAssistance................................................................. 34

Appendix:

NationalGrossdomesticproduct(2008)andTobaccoIndustryRevenues,Income,Profitsandtaxes

paid........................................................................................................................................................ 36


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Aroundtheworld,ahandfulofglobalizedtobaccocompaniescontrolvirtuallyalltobaccosales.

Theglobaltobaccomarketisincreasinglyconcentratedinthehandsofaveryfewcompanies.Repeatedmergers

havereducedthenumberoftobaccocompaniesoperatingineitherglobalordomesticmarkets.Amongthe

companieswhichhavebeenacquiredorbroughtunderthecontrolofothercompaniesduringthecourseofthe

pastdecadeareRothmans,Reemstma,SEITA,Tabacalera,Gallaher,Sampoerna,Rothmans,BensonandHedges

Lakson andTekel.1Inonlyafewnations(including,amongothers,China,theUnitedStates,JapanandEgypt)is

thetobaccomarketcontrolledbycompaniesheadquarteredinthatcountry.

Increasedcorporateconcentrationinthetobaccosectorhasbrought50%oftheworldscigarettemarketunder

thecontrolof4multinationals.Thesecompanies(andtheirshareofglobalmarketasreportedbyBAT)arePhilip

MorrisInternational(16%),BritishAmericanTobaccoanditsassociates(16%),JapanTobacco(11%)andImperial

Tobacco(6%).TheremainingmarketshareforcigarettesisreturnedtothestatemonopoliesoperatinginChina,

principallythe

China

National

Tobacco

Company

(39%),

the

U.S.

operations

of

Philip

Morris

through

Altria

(3%),

withallothertobaccocompaniesaccountingfortheremaining11%.2

3Itisestimatedthat5.6trillioncigarettesare

soldworldwideeachyear.4

Oneconsequenceofthisglobalconcentrationistheabilitytotrackthemovementofearningsfromcigarettesales

acrossborders,asthesepubliclyheldcompaniesarerequiredtodisclosedetailedfinancialstatementstotheir

shareholders. Despitefluctuationsincurrencyvalues,differencesinreportingperiods,andlackofuniform

regionalstructures,itispossibletoaggregatetheearningsofthesecompanies.Theannualreportsofthese

companies5

6

7

8andotherindustryreports

9recordthat,forreportingperiodsendingincalendaryear2008,more

thanUSD19billionwasearnedbytobaccocompaniesoperatinginaforeignmarket.(SeeTable1)

The

global

tobacco

trade

is

expected

to

become

increasingly

globalized,

as

further

mergers

and

acquisitions

are

plannedbyoperatingcompanies. TheChineseStateTobaccoMonopolyAdministration,forexample,announced

inearly200910

itsthreestageplantoexpanditsoperationsoverseas:Steponeinvolvedtheestablishmentof

cigarettefactoriesandmarketingnetworks,thesecondstepwouldinvolvecapitalinvestmentsinoverseas

enterprisesandthethirdwouldinvolvethelaunchofmergersandacquisitions.

Afewdomestictobaccooperationscontinuetoexistdespitethepushforglobalizedandintegratedmarkets.

CompaniesoperatingprincipallyindomesticmarketsincludecompaniessuchasEgyptsEasternTobacco(Egypt),

ThailandsTobaccoMonopoly,BulgariasBulgartabak,TaiwansTobacco&LiquorCorp(Taiwan)andVietnams

NationalTobaccoCorporation.

1


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2

FIGURE1.1:

ACQUIRED

Rothmans

EnteTaba

CigaretteTekel(Tur

Bentoel(I

Tobaccor(

Reemtsma

Commonw

Altadis(In

LiggettDu

AustriaTa

Gallaher(I

Internatio

Brown&

Altriaspin

Sampoern

Rothmans,

Lakson(Pa

MERGERSAND

(International

chiItaliani(Itomponentofey,2008)

donesia,200

Africa,2001)

(Internationa

ealthBrands(

ernational,2

cat(toGallah

ac(to

Gallah

nternational,

alcomponen

illiamson(US

offPMI(200

a(Indonesia,

Benson&He

kistan,2008)

I

JTIJPN3%

JTIEXP8%

PMI15%

KT

KT&GEXP0.7%

Figure1.2:

CQUISITIONSA

,1999)

ly,20034)

Skandinavisk

)

l,2004)

USA,2006)

08)

r,2000)

r,2003)

007)

ofRJReynol

A,2004)

)

006)

dges(Canada,

TGEXP5%

GKOR.1%

TTM0.5%

GlobalMarDomestic

ONGSTMAJOR

obaks (2008)

s(2001)

2008)

ITGUK0.4%

Other9%

LORUS

0.6

ketShareo(red)andEx

OBACCOCOMPA

Altria3%

MajorCigport(blue) s

NIES.11

AT6%

CNTC38%

retteCompales

ACQ

BritishAme

Imp

J

Reyno

PhilipMorris

anies

UIREDBY

icanTobacco

erialTobacco

panTobacco

ldsAmerican

International


9/47


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4

FIGURES1.

FIGURE1.4:

Source:Inves

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

:GLOBALMAR

GLOBALSALES

torpresentations

39

16

15

21

9

European

ETSHAREOFM

NDMARKETSHA

andAnnualRepor

nion East

PMI BA

JORTOBACCO

REOFLEADING

ts.

22

20

22

10

26

rnEurope,Mi

East

and

Africa

JapanTo

OMPANIESBYR

IGARETTEBRAN

dle Asia(e

bacco Im

GION.13

S

18

15

17

2

48

xcl.China)

erial Oth

30

53

30

14

Americas(ex

r

l.USA)


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In2008,a

base.Thes

ornecessi

represent

Withrare

smallmar

tobaccoc

Chinasto

ofthefew

outsideof

Ukraine,T

ifthenext

UnitedKin

tablebelo

Therelati

countries.

thirdofits

ofitstotal

memberc

Fewtobac

do,howev

operation

summariz

domestic

2

China,

2200

Repatri

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proximately

eearningswo

atedvirtuals

atransferof

xception,the

ets.Thereare

nsumption.

accomarket,

marketsserv

China,about

urkey,India,B

10largestma

gdom,Mexico

.

nshipbetwe

PhilipMorris

totalsales,th

sales,butonl

untriesistwi

cocompanies

er,reportresu

,theirregion

stheresults.

arketonlyar

Russia,

405

PMI/Altria

atedpr

sumso

S$20billion

uldnothaver

ipmentandtr

ealthfromon

companiesdo

,however,ad

thelargestin

dbydomestic

alfare

smoke

razil,Korea,a

rketsareinclu

).Fiftynation

nvolumeofci

International,

eymakeup46

54%ofitspr

ceashigh(at

reportsaleso

ltsonaregion

lsalesandear

Comparabled

ealsoprovide

n

e

aes,

Japan,

249

Fandvolu

BAT&Assoc

fitsres

fmone

asearnedby

sultedinthe

ansferofmon

eregionofth

notreportsa

ozenorsoco

heworldbyf

industry(int

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only

ten

dItaly).Thep

ded(Germany

lmarketsrep

garettessold

forexample,r

%ofitsearnin

fits.Theaver

S$0.55)asit

apernation

albasis.Beca

ningsarepres

taonsmaller

inthefollow

Indonesia,

247

Brazil,

128

igure2.1:Larmeofcigarett

JapanToba

ultinth

fourtobacco

physicalshipm

eytothehom

worldtoano

lesonaperc

ntrieswhich

r(representin

iscasestate

ountries:Rus

roportionofc

,Spain,Vietna

esentingabo

andvolumeof

eportsthatalt

gs.Conversel

geearningso

isindevelopin

basis,evenfe

setheyused

entedindivid

tobaccocomp

ingtables.

Ukraine,

122

Turkey,

107

estCigarettees(billions)so

cco Imperi

etrans

ompaniesop

entofmoney

ebaseofthe

ther.

untrybasis,e

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g38%ofthe

wned).Ofth

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United

igarettessmo

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t90%ofglob

profitsshipp

houghsalesin

,salesinnon

napackageo

gcountries(a

erreportear

ifferentappro

allyonthefol

aniesandco

India,

107

Korea

95

Marketsldinrecentye

lTobacco

nationa

ratingoutsid

fromonejuris

ultinational,

speciallyfors

forthemajor

igarettessmo

3.5trillionci

States,

Japan,

edoutsideof

,Israel,Egypt,

altobaccosal

disnotconsis

OECDnations

OECDnations

cigarettessol

t$US0.27).

ningsonaper

achestoorgan

llowingpages.

panieswhich

Italy,

92

ar

Stateowned

ltransf

theirnationa

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allcountries

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kedglobally),i

arettessmok

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Poland,Franc

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tentacross

makeuponly

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low


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6

TABLE2.1MARKETSHARESINMAJORMARKETS(BILLIONSOFCIGARETTES)14

15

16

17

18

19

20

21

22

COUNTRY TOTALVOLUME

%OFWORLDCONSUMPTION

CIGARETTESALESBYCOMPANY(BILLIONS)

PMI/Altria BAT&Assoc.

JapanTobacco

ImperialTobacco

ByRegiona Other

EuropeanUnion 623 11% 243 100 93 131 56

EasternEurope,Middle

EastandAfrica1377 24% 303 275 303 138 358

Asia(excl.China) 1244 21% 224 187 212 25 597

LatinAmericaand

Canada(ex.USA)330 6% 99 175 10 0 46

ByCountry Stateowned

China 2200 38.5% 2,178

Russia 405 7.1% 101.7 101.3 145.8 44.6

UnitedStates 345 6.0% 189.8 69.0 10.4

Japan 249 4.4% 57.3 24.9 162.1

Indonesia

247

4.3%

71.6

22

Brazil 128 1.8% 11.8 108

Ukraine 122 2.1% 44.4 22.0 35.4 26.6

India 107 1.9% 0.0 66.3

Turkey 107 1.9% 45.7 38.5 18.2 3.4

SouthKorea 95 1.7% 9.0 16.2 3.9 63.7

Italy 92 1.6% 49.7 23.0 12.3 2.7

Germany 91 1.6% 34.8 22.8 2.7 19.5

Spain 91 1.6% 29.1 9.6 15.7 25.6 4.2

Vietnam 85 1.5% 0.9 21.3

Philippines 79 1.4% 27.3 14.8

Israel 77 1.4%

Egypt

75

1.3%

74.3

Poland 70 1.2% 26.5 21.3 4.2 17.3

France 55 1.0% 22.9 8.2 7.1 14.6

Argentina 49 0.9% 35 14.2

UnitedKingdom 49 0.9% 3.1 3.9 19.0 21.4

Mexico 47 0.8% 32.4 19.6

Bangladesh 45 0.8% 20.3

Taiwan 42 0.7% 2.2 4.4 14.9 4.2

Iraq 41 0.7% 612

Thailand 39 0.7% 9.3 1.1 27.7

Greece 34 0.6% 12.9 5.5 4.4 3.9

Canada 30 0.5% 9.9 15.3 3.3

Romania 27 0.5% 8.1 10.9 7.4

CzechRepublic 24 0.4% 13.3 3.3 2.3 2.6

Algeria 24


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COUNTRY TOTALVOLUME

%OFWORLDCONSUMPTION

CIGARETTESALESBYCOMPANY(BILLIONS)

SaudiArabia 18 0.3% 11.5 3.9 0.9

Portugal 18 0.3% 14.4 1.1 1.7 0.7

Hungary 17 0.3% 5.1 7.2 2.1

Malaysia 16 0.3% 2.9 10.1 3.1

Venezuela 15 0.2% 1.5 11.0

Morocco 15 0.3% 1.4 0.6 0.2 12.4

Netherlands 14 0.3% 4.6 4.3 2.3 1.4

Nigeria 14 0.3% 7.1

Austria 13 0.2% 3.7 0.7 5.1 1.5

Switzerland 12 0.2% 4.9 4.8 1.6

Belgium 12 0.2% 4.5 2.5 1.3 1.9

Denmark 8 0.1% 0.4 7.1 0.2

Lebanon 7 0.1% 12

Sweden 6 0.1% 1.8 1.8 2.2 0.0

Ireland 6 0.1% 0.7 2.8 2.0

Finland

5

0.9%

33.7

6.4

8.6

a.PhilipMorrisInternational OperatingRegion

FIGURE2.2:REPATRIATIONOFPROFITSFROMTHESALEOFMANUFACTUREDTOBACCOPRODUCTSACROSSNATIONALBOUNDARIESTOCORPORATEHEADOFFICES,2008.

Source:AnnualReportsofCompanies.

EasternEuropetoBAT$684million

AfricaandMiddleEasttoBAT$750million

U.K.toITG$1billion

ContinentalEUtoITG $1.7billion

RestofWorldtoITG$719million

InternationalsalestoJTI$1.8billion

JapantoJTI$1.9billion

EUtoPMI$4.7billion

AsiatoPMI$2billion

LatinAmerica

&

CanadatoPMI$520million

WesternEuropetoBAT$1.1billion

EasternEurope,MiddleEastandAfricatoPMI$3billion

AmericastoBAT$1.5billion

AsiaPacifictoBAT

$1.35billion

U.S.toAltria$4.9billion

AmericastoITG $296million


14/47


15/47

THERECIPIENTSOFPHILIPMORRISINTERNATIONALSPROFITS.

In2008,PMIreportedrevenues(includingexcisetaxesontobaccoproducts)ofover$63billion.Aboutonequarter

oftheirrevenuewenttopayformanufacturingandoperatingcostsandtwothirdswenttopayexciseandincome

taxes.Theyretainedabout11%ofrevenuesasnetearnings,ofwhich3%weresenttoshareholdersintheformof

dividendpayments.31

PMIANDTHETRANSBOUNDARYFLOWOFTOBACCOBASEDREVENUES

PhilipMorrisInternationalsellsonlyoutsideoftheUnitedStatesand

organizesitsactivitiesinfourregions:EuropeanUnion,EasternEurope,

MiddleEastandAfrica,Asia,LatinAmericaandCanada.TwothirdsofPhilip

Morrissalesareindevelopingcountrymarkets.32

PhilipMorrisInternationalsrevenuesandsalesaregrowingatahigherrate

indevelopingcountriesthanindevelopedcountries:between2003and

2004,itreportedgrowthofoperatingincomeof216%innonOECD

countries,comparedwith129%inOECDcountries.Salesvolumeswere,

respectively148%

and

92%

of

their

2003

levels

in

2007.

33

TABLE3.2: PHILIPMORRISINTERNATIONALSALESANDREVENUESBYREGION.34

35

EARNINGSBEFOREINCOMETAXES VOLUMEOFSALES EARNINGSPERPACK

($USmillions) % (billionsof

cigarettes)

%

TotalSales 9,937 100% 869 100% US$0.23

EuropeanUnion 4,738 48% 243 28% US$0.39

EasternEurope,

Middle

East

and

Africa3,119

31%

303

35%

US$

0.21

Asia 2,057 21% 224 26% US$0.18

LatinAmericaandCanada 520 5% 99 11% US$0.11

(costsnotallocatedtoregions) (497) 5%

NonOECDCountries 3,279 33% 469 54% US$0.27

OECDCountries 6,657 67% 399 46% US$0.55

PhilipMorrisInternationalT

repatriatesabout

US$10billioninearnings

fromglobaltobaccosalesto

theUnitedStates

Onehalfofitssales(andone

thirdofitsearnings)are

fromnonOECDcountries.


16/47

10

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ATsowners

oniskeptby

rnings.

dualor

hanfourfifths

eholders.38

oldingsisthe39

(1,1million

edepot(.5

shareswere

einterests,

eseshares

hip,including

.

Atot

and

milli

TABL

TOBA

Total

Costs

Cost

Oper

other

Taxe

Excis

Inco

Earni

Oper

Profit

Paym

share

Retai

Annu

Oper

aBAT

oper

1Cur

alofUS$14.5

ormerdirecto

ntoChiefEx

3.3: KEYFINA

CCO(BAT)42

Revenues

ofmaterials

atingand

costs

Taxes

eTaxes

ngs

atingIncomea

entstopublic

holders

nedEarnings

aldividend

atingmargin

usestheterm

tingincome.

rencyconvers

399holders,

83%

Concentr

millionwasp

rs,including

cutive,PaulA

CIALINDICATOR

AMOUNT

(millions) (

33,921

8,550

3,335

5,215

22,824

21,799

1,025

3,572

2,659

1,393

1,578

0.837

31%

ProfitfromOpe

ionsetforDe

ationofBAT

idto16curre

orethanUS$

dams.

S,BRITISHAME

US$millions)1

49,572

12,495

4,874

7,621

33,355

31,857

1,498

5,220

3,886

2,036

2,306

S$1.22

rationstodes

ember31,20

93,439holders,

2%

12,7hold

33,218

holders,7%

344holders,

5%

ownership

nt

ICAN

100%

25%

10%

15%

67%

64%

3%

11%

8%

4%

5%

ribe

8.

76ers,


17/47


18/47

12

TheImperialGroup.

TheImperialTobaccoGroupPLC(ITG)isan

increasinglyimportantmultinationaltobacco

companythatisalsobasedintheUnitedKingdom

(not

to

be

confused

with

Imperial

Tobacco

Canada,

Ltd.,whichisasubsidiaryofBritishAmerican

TobaccobasedinMontreal,Canada).

ITGissolelyfocusedontobaccoandtobaccorelated

productsandservices: itmanufacturescigarettes

(includingtheLambertandButtler,Davidoff,West,

Gauloise,GitanesandFortunabrands).Itisthe

worldslargestmanufacturerof cigars(including

Cohiba,Montecristo),finecuttobacco(includingthe

DrumandGoldenVirginiabrands)androllingpapers

(suchasRizla).Italsorunsthelogisticaloperations

oftobaccodistributioninsomeEuropeancountries.

ITGreportsthatitemploys40,000workersin58

manufacturingsites.49

Whereasadecadeagoonlyonequarterofits

earningswerefromsalesoutsideoftheUnited

Kingdom,internationalsalesnowmakeupthree

quartersofITGsoperatingincome,althoughmostof

thosearesaleswithintheEuropeanUnion.

This

increasedinternationalmarketwasaresultofthe

purchaseoftheSpanishFrenchAltadis,theGerman

basedReemtsma,50theAmericanCommonwealth

BrandsandAfricanTobaccor.

THERECIPIENTSOFIMPERIALTOBACCOSPROFITS.

In2008,aboutonehalfofImperialTobaccos

revenueswerereturnedtogovernmentsintheform

ofexciseandincometaxes.$1billionwasreturned

toITGsownersintheformsofdividends,and$2.3

billioniskeptbythecompanyintheformof

retainedearnings.AtotalofUS$22millionwaspaid

to21currentandformerdirectorsofthecompanyin

theformofexecutivecompensation,withthe

highestpaymentofalmostUS$7millionocurrent

ChiefExecutive,GarethDavis.51

ImperialTobaccoreportedin2007thataboutone

quarterofitsordinaryshareswereownedbyU.S.

holders.52

TABLE3.5: KEYFINANCIALINDICATORS,IMPERIALTOBACCOGROUPPLC(ITG)

53

AMOUNT %

(millions) (US$millions)2

TotalRevenues 20,528 36,543.95 100%

Costs 8,959 15,949 44%Costofmaterials 6,253 11,132 30%

Operatingand

othercosts

2706 4,817 13%

Taxes 10,592 18,856 52%ExciseTaxes 10,412 18,535 51%

IncomeTaxes 180 320 1%

Earnings

OperatingIncome 2,230 3,969 11%

Profit 977 1,739 5%

Paymentstopublic

shareholders

588 1,046 3%

Annualdividend

pershare

0.63 $1.12

Operatingmargin 40.2%

2CurrencyconversionsetforSeptember30,2008.


19/47

IMPERIALTOBACCOANDTHETRANSBOUNDARYFLOWOFTOBACCOBASEDREVENUES

ImperialTobaccosmarketoutsideoftheUnitedKingdomreflectsthe

marketpresenceofthecompaniesitacquired(Reemstma,andAltadisand

Commonwealthbrands).OnlyonefifthofitsmarketisoutsidetheEuropean

UnionandAmericas,andmorethan50%ofitsRestofWorldsalesarein

Russiaand

the

Ukraine,54

leaving

about

80

billion

cigarettes

sold

outside

of

theUnitedStates,CISandEurope.

TABLE3.6: IMPERIALTOBACCOGROUPEARNINGSFROMCIGARETTESALESBYREGION55

OPERATINGINCOMEA CIGARETTES FINECUT TOTALCIGARETTESANDCIGARETTE

EQUIVALENTS3

EARNINGSPERPACKAGEOFCIGARETTES/FINE

CUTEQUIVALENTS

(millions) (US$

millions)4

% Billions Tonnes Billions US$

DirectOperations

2,107 3,751 100% 291.8 20,850 329 0.13 0.19

UnitedKingdom 584 1,040 28% 21.4 2,350 25 0.47 0.84

Germany 309 550 15% 22.9 30 0.21 0.37

Spain 150 267 7% 22.9 1,550 25 0.12 0.21

Restof

EuropeanUnion

494 879 23% 56.8 14,300 77 0.13 0.23

Americas 166 296 8% 15.2 600 16 0.21 0.37

RestofWorld 404 719 19% 152.6 2050 156 0.05 0.09

Developedcountries 40%Developingcountries 60%aImperialTobaccoGroupPLCstatesthisasAdjustedProfitFromOperations.Theseareearningsfromtobaccosalesafter

excisetaxeshavebeenpaidandbeforeincometaxesarelevied.Additionaladjustmentsaretakenintoeffectwhencalculating

overalloperatingincome,asstatedinprevioustable.

3Calculatedat.7gramsoffinecutpercigarette

4ConversionsettoSeptember30,2008,thefiscalyearendforImperialTobaccoGroupPLC>

ImperialTobaccorepatriates

aboutUS$4billionin

earningsfromglobal

tobaccosalestoBritain.

Morethan

one

half

of

its

sales(byvolume)arein

developingcountries.


20/47

14

JapanTobaccoInternational

JapanTobaccoInternational

(JTI)isbasedinJapan,where

theJapanesegovernment

currently

holds

one

half

of

its

shares.TheJapaneseMinister

ofFinancehastheauthorityto

superviseitsoperations.56

Unliketheothermajor

multinationaltobacco

companies,JapanTobaccoalso

hasinterestsinotherareasof

business,includinga

multinationalPharmaceutical

businessandaFoodbusiness.

THERECIPIENTSOFJAPANTOBACCOSPROFITS.

About60%ofJTIsstocksare

heldbytheJapanese

governmentorJapanese

investors.Dividendpaymentsto

theJapanesegovernmentfrom

internationaltobaccosalesby

JTIareestimatedatUS$132

million.57

Canadiangovernmentrevenues

fromJTIstobaccosales

(domesticandinternational),in

theformofdividendpayments

totheCanadaPensionPlan,are

estimatedat$440,000.58

TABLE3.7: KEYFINANCIALINDICATORS,JAPANTOBACCO

AMOUNT %

Yen

(Millions)

(US$

millions)5

TotalRevenues(includingexcisetaxes) 6,832,307 69,554 100%DomesticTobacco 3,200,494 32,581 47%

InternationalTobacco 3,118,319 31,745 46%

Pharmaceutical 56,758 578 1%

Food 435,966 4,439 6%

Others 20,770 211 0%

NetSales(excludingexcisetaxes) 2,295,117 23,365 100%DomesticTobacco 679,302 6,915 30%

InternationalTobacco 1,102,320 11,222 48%

Pharmaceutical 56,758 578 2%

Food 435,966 4,439 19%

Others 20,770 211 1%

OperatingIncome(aftercosts) 363,806 3,704 100%DomesticTobacco 188,259 1,917 52%

InternationalTobacco 174,772 1,779 48%

Pharmaceutical 1,020 10


21/47

JAPANTOBACCOANDTHETRANSBOUNDARYFLOWOFTOBACCOBASEDREVENUES

JTIsellstwiceasmanycigarettesoutsideofJapanasitdoeswithinitshome

country.Itorganizesitsinternationaloperationsintothefollowingregions:

NorthandCentralEurope(UnitedKingdom,Ireland,AustriaandSweden),the

CommonwealthofIndependentStates(CIS)(Russia,Kazakhstan,Ukraineand

Romania),South

and

West

Europe

(Spain,

France,

Italy

and

Greece),

and

the

RestoftheWorld(Turkey,Taiwan,MalaysiaandCanada).About60%ofJTIs

tobaccosalesareininternationalmarkets. Itoperates30tobaccofactories

outsideofJapan

LiketheImperialTobaccoGroup,JTIincreaseditsglobalmarketpresencethroughtherecentacquisitionofother

multinationaltobaccocompanies,suchasthepurchaseofRJReynoldsinternationaltobaccobusinessin1999and

theacquisitionoftheU.K.GallaherGroupin2007. ThemajorinternationalbrandsreflecttheRJReynoldsand

Gallaherroots:Winston,Camel,MildSeven,Benson&Hedges,SilkCut,LD,SobranieandGlamouraresoldbyJTI

outsideoftheUnitedStates.

TABLE3.8:JAPANTOBACCOINTERNATIONALSALESBYREGION59

NETREVENUE VOLUMEOFCIGARETTES

SOLD

EARNINGSPERPACKAGEOFCIGARETTES

(millions) (US$millions)6

Billions US$

InternationalTobacco 174,772 1,779 452.3 7.73 $0.08

NorthandCentralEurope 50.8

CIScountries 219.7

South&WestEurope 64.0

RestofWorld 117.7

Domestic(Japan)Tobacco 188,259 1,917 159.9 23.55 $0.24

Total 353,031 3,696 612

6ConversionsettoSeptember30,2008,thefiscalyearendforImperialTobaccoGroupPLC.

JapanTobaccorepatriates

aboutUS$2billionin

earningsfromglobal

tobaccosalestoJapan.

.


22/47

16

Othertobaccocompanies

ChinasNationalTobaccoCompany

Thecigarette

industry

in

China

is

managed

through

theStateTobaccoMonopolyAdministration.There

areabout16provincialtobaccocompanies,which

operateassubsidiariesoftheChinaNational

TobaccoCorporation,eventhoughtheyareseparate

legalentities.60

TABLE3.9: SALESBYSTATEOWNEDTOBACCOCOMPANIESINCHINA

61

AMOUNT

(Yuan

millions)

(US$

millions)

Totalrevenues

Taxesandprofits62 449,941 64,280

manufacturingandcommercial

taxes

264,086 37,730

manufacturingandcommercial

profits

185,855 26,550

Valueofexports63 738

Domesticsales(trillionsof

cigarettes)

2,200

Exportsales(billionsof

cigarettes)

15.8

Notavailable

KT&G(KoreaTobaccoandGinseng)

KT&GCorporationisaformerstatemonopolybased

inSeoul,Korea,formerlyknownastheKorea

TobaccoandGinsengCorporation.KT&Gwas

privatizedinthreestepsoverthepastdecade,andis

nolongercontrolledbytheKoreangovernment,

althoughthegovernmentownsabout14%of

KT&Gsshares.64

TABLE3.10: KT&GFINANCIALINDICATORS.65

AMOUNT

(KoreanWon

billions)

(US$

millions)

Totalrevenues

Netsales(afterexcise) 2,514 1999Domestic 641.8 510

International 502 399

Costs 1669 1327Costofgoodsold 1,023 813

Othercosts 646 514

OperatingIncome 975 776DomesticTobacco 615

a 489

InternationalTobacco

160.8

128

Food 200 159

TaxesExciseTaxes

IncomeTaxes 287 228

NetIncome 894 711Paymentstopublic

shareholders

dividendpershare KRW2,800 $2.23

OperatingMargin(all

sectors.

36.90%

Notavailable

aOperatingincomefromdomestictobaccosalesisnot

statedinKT&GsAnnualreport,butiscalculatedfrom

figuresstatedforothersectors.

Source:KT&GAnnualReport,2008.


23/47

ThailandTobaccoMonopoly(TTM).

TheThailandTobaccoMonopoly(TTM)wascreated

in1939whentheThaigovernmenttookover

ownershipanddirectionofexistingtobacco

operations.

66

The

TTM

was

the

only

source

for

legal

tobaccoproductsinThailanduntiltheWTO

demandedthatThailandenditsbanoncigarette

importsin1990. TheTTMmanufacturesabout22

billioncigarettes.67

TheTTMcontinuestomakeandsellthemajorityof

cigarettessoldinThailand.

TABLE3.11: SALESBYTHAITOBACCOMONOPOLY68

2007 Amount

Bhatmillions

(US$

millions)

Totalrevenues 47,418 $1,487

Taxcontribution 38,920 $1,220

TotalExpenses 41,184 $1,291

Netprofit 6,234 $195

Contributiontogovernment 4,649 $146

Profitmargin 12.15

Notavailable

TaiwanTobacco&LiquorCorporation(TTL).

ThegovernmentownedTaiwanTobacco&Liquor

Corporationanditspredecessoragencieshada

completemonopolyoftobaccosalesinTaiwanuntil

thelate1980s,whenTaiwanopeneditsdoorsto

importsaspartofitsentrytoWT0.69

TheTTLhasabout40%marketshareofTaiwans40

billionannualcigarettesales,70

andgeneratesabout

US$76millionrevenues.71

VietnamNationalTobaccoCorp(VINATABA)andotherVietnamproducers.

VinatabawascreatedbytheGovernmentof

Vietnamin

1995,72

and

is

part

of

acomplex

set

of

tobaccooperatingunitsreportingtodiffering

elementsoftheVietnamgovernmentandruling

communistparty.73

Thereareabout20different

producersinVietnam,andamarketsizeofabout85

billioncigarettes.74

ThetobaccomarketinVietnamwasprotectedfrom

importsuntil2006,whenVietnamjoinedtheWTO

andhadtoremovebarrierstoimportedtobacco

products. Priortothat,multinationaltobacco

companieshad

operated

through

agreements

with

VINATABA,andimportsarestillcontrolledthrough

thisstateagency.75

ImportedbrandsareproducedinVietnamthrough

cooperationcontractswithVINATABA. BAT

brands,producedwithVINATABA,have25%ofthe

market.


24/47

18

Lorillard

Lorillardisthethirdlargestmanufacturerof

cigarettesintheUnitedStates,afterAltriaand

ReynoldsAmerica. FormerlylinkedwithLoewss,it

has,

since

May

2008,

been

a

separately

managed

andtradedcompany.

Lorillardsellsabout37billioncigaretteseachyear

(about10%oftheU.S.market),andearnsaboutUS$

0.48oneachpackageof20cigarettes.

TABLE3.12: KEYFINANCIALINDICATORS,LORILLARD

AMOUNT

US$Millions

Totalrevenues

4,204

Netsales(afterexcise) 3,492

Costs 2,789Costofgoodsold 2428

Othercosts 361

OperatingIncome 1415

Taxes 1259ExciseTaxes 712

IncomeTaxes 547

NetIncome

887

Paymentsto

shareholders

783

dividendpershare $4.67

ReynoldsAmericanInc. ( R A I )

ReynoldsAmericanIncorporatedwascreatedin

2004fromamergerofRJRTobaccoandthe

operationalendofBATssubsidiary,Brownand

Williamson.RAI

is

aholding

company,

of

which

BAT

owns42%.RAIsrevenuesaregeneratedbythesale

ofcigarettesthroughRJRTobaccoandthesaleof

smokelesstobaccoproductsbyConwood. Italso

operatestheSanteFeNaturalTobaccoCompany.

RJRTobaccosellsbrands,likeCamelandWinston,

thataresoldelsewhereintheworldbyJapan

Tobaccoaswellasbrands,likePallMallandKOOL,

thataresoldelsewhereintheworldbyBATandits

subsidiariesandassociates.

TABLE3.13: KEYFINANCIALINDICATORS,REYNOLDSAMERICANINC.

76

AMOUNT

US$Millions

Totalrevenues

Netsales(afterexcise) 8,845RJRTobacco 7,678

Conwood. 723

Other 444

Costs 6,363Costofgoodsold 4,863

Othercosts 1,500

OperatingIncome 2,141RJRTobacco 1,756

Conwood. 232

Other 153

Taxes 2,680ExciseTaxes 1,890

IncomeTaxes 790

NetIncome 1,338

Dividendpershare $3.40


25/47

SwedishMatch

SwedishMatchisstillaSwedishcompanybasedin

Stockholm,butthematchcomponentofits

businessisnowlessthan10%ofitsbusiness.The

bulk

of

its

revenues

come

from

the

sale

of

Snuff

and

snus,chewingtobacco,cigarsandpipetobacco.

SwedishMatchdoesnotmanufacture

cigarettes.SwedishMatchemploysmorethan11,000

peopleandhasproductionplantsin11countries.

THERECIPIENTSOFSWEDISHMATCHSEARNINGS.

SwedishMatchreturnedUS$1.3billionto

governmentsintheformofexcisetaxesanda

furtherUS$49millioninincometaxes.AboutUS$

133millionwasreturnedtoshareholders,three

quartersof

whom

reside

outside

of

Sweden

(34%

in

theUnitedStates,23%intheUnitedKingdomand

19%elsewhere).

TABLE3.14: KEYFINANCIALINDICATORS,SWEDISHMATCH

AMOUNT %

Swedish

Krona

millions

US$

million

Percent

ofgross

revenue

TotalRevenues 23,718 3,010 100%

Salesafter

excise

taxes

13,162

1,670

55%

*Nordicregion 5,437 690

*NorthAmerica 4,167 529

*RestofWorld 3558 452

Costs 10,166 10,941 43%Costofmaterials 6,685 848 28%

Operating/othercosts 3,481 442 15%

Taxes 10,941 10,941 46%ExciseTaxes 10,556 1,340 45%

IncomeTaxes 385 49 2%

OperatingIncomea 3,090 392 13%

*snufand

snus

1,689

214

*pipes&accessories 210 27

*cigars 679 86

*'chewingtobacco 329 42

Profit 2,261 287 10%Paymentstoshrhldr. 1,046 133 4%

RetainedEarnings 782 99 3%

Annualdividend 4.1 0.52

Operatingmargin 22.9%

EasternCompanySAE(Egypt)

TheEgyptiangovernmenthascontrollingownership

inEasternCompanySAE,whichwasnationalizedin

1963.Abouthalfofitssharesareheldprivately.77

78

EasternCompanyhasavirtualmonopolyon

cigarettessoldinEgypt,witha99%marketshare.It

makessomebrandsunderlicensewithBATand

PhilipMorris. Itmanufacturesabout78billion

cigarettes,anditsmostcommonlypurchasedbrand

isCleopatra.

TABLE3.15:REVENUESOFEASTERNCOMPANYSAE

AMOUNT

Egyptian

pounds

millions

US$Millions

OperatingRevenue 3,819 699.63

Netincome 751 137.64


26/47

20

Governmentssharemorethan$160billioninannualrevenuefromtobaccosalesfromonly9companies.

Theinformationoncorporaterevenues(presentedabove)showsthattheproportionofthetotaltobacco

economythatisreceivedbygovernmentsintheformofexcisetaxesandtaxesonthecorporateincomeof

tobaccomanufacturersisusuallyinexcessof50%. Althoughtaxratesandprofitmarginsvarygreatlyacrossthe

countriesinwhichthesecompaniesoperate,theconsolidationoffinancialreportingthatresultsfromthe

globalizationoftobaccosalesallowsforeasierinsightintothefinancialimpactoftobaccoonglobalgovernment

revenues.

Governmentswillreceivemoniesfromtobaccosalesinatleastthreeforms:

Excisetaxes,whicharecollectedbytobaccocompaniesatthepointofsaleandremittedtogovernment.

In2008,thefourmajormultinationalsreportedpayingexcisetaxesinexcessof$100billiondollars.

Corporateincometaxespaidonprofitsfromtobaccosales.

In2008,thefourmajormultinationalsreportedpaymentsofalmost$6billioninincometaxpayments

(withU.S.basedproducersadding$2billionmore). FromtheannualreportsofBATandImperialTobacco

group,itwouldappearthatthesetaxesarepaidbythesubsidiarycompaniestothecountryinwhichthe

incomewasgenerated.Includingthecorporateincometaxespaidbyretailers,leafsuppliersandother

participantsinthetobaccoeconomywouldpushthisamountwellinexcessof$6billion.

Profitsharingwhengovernmentsareownersorpartownersoftobaccocompanies.

CompanieswithsignificantstateownershipincludetheChinaNationalTobaccoCompanyandother

companieswhollyownedbythegovernmentofChina,theEasternCompanySAE(abouthalfownedby

thegovernmentofEgypt),JapanTobaccoInternational (JTI)(abouthalfownedbytheJapanese

government),KT&G,formerlyKoreaTobaccoandGinseng(about14%ownedbythegovernmentofSouth

Korea),theTaiwanTobaccoandLiquorCorporation(whollyownedbytheTaiwangovernment),theThai

TobaccoMonopoly(whollyownedbytheThaigovernment)andtheVietnamNationalTobaccoCompany

(whollyownedbytheVietnamGovernment).Governmentsmayalsobeshareholdersinpublicallytraded

companies,astheCanadiangovernmentis(seebelow).

4


27/47

TABLE4.1:GOVERNMENTREVENUESFOREXCISEANDINCOMETAXESFROMTOBACCOSALES,SELECTEDCOMPANIES.

COMPANY %GLOBALCIGARETTE

MARKET

EXCISETAXES/DUTIES

INCOMETAXES

TOTAL

Fiscalyearend US$millions

Altria

31Dec

08

3%

3,399

1,699

5,098

BritishAmericanTobaccoandAssociates(BAT) 31Dec08 17% 33,355 1,498 34,853ChinaNationalTobaccoCompany(CNTC) 31Dec08 38% 37,730ImperialTobaccoGroup(ITG) 30Sep08 6% 18,856 320 19,176JapanTobaccoInternational (JTI) 31Mar09 10% 20,523 1,374 21,897KT&G(KoreaTobaccoandGinseng) 31Dec08 1% PhilipMorrisInternational (PMI) 31Dec08 16% 37,935 2,787 40,722ReynoldsAmerican 31Dec08 * 1,890 790 2,680ThaiTobaccoMonopoly(TTM) 31Dec06 1% $1,220 1,415

Total 91% 116,628 7,727 162,280Notavailableornotfound;*includedwithBATtotal;

Sources:Annualreportsofcompaniesandinvestorpresentations,TobaccoChinaOnline

Governmentrevenuesfromtobaccosalesexceedtheeconomiesofmorethan130nations.

Thesizeofthetobaccoeconomyrelativetotheglobaleconomycanbeconsideredbycomparingitwithother

measurementsofeconomicactivity.

Taxrevenuesreportedbylarge

tobaccocompaniesexceedtheGross

DomesticProductasreportedbythe

WorldBankforallbutthewealthiest

50nations.79

Theoperatingincome

(earnings)ofthebigfivecompaniesis

largerthantheeconomiesof100

nations.

Governmentrevenuesfromexcise

taxesontobaccoproductsaresix

timesthetotalbudgetofallUnited

Nationsoperations,including

peacekeepingandspecializedagencies

liketheWorldHealthOrganizationand

UNESCO,and

about

equal

to

the

operatingincomeofthelargefive

multinationalcompanies.80

Tobaccorevenuesareabout1%ofthe

totalincomeofallgovernmentsworldwide,asestimatedbytheU.S.CentralIntelligenceAgency.81


28/47

22

Canadianpensionersreceivefinancialbenefitsfromglobaltobaccosales.

ThefinancialinvestmentofgovernmentsintobaccocompaniesrunscountertotheFrameworkConventionon

TobaccoControl.ThroughArticle5.3,partiestothetreaty,suchasCanada,undertakeInsettingand

implementingtheirpublichealthpolicieswithrespecttotobaccocontrol,Partiesshallacttoprotectthesepolicies

from

commercial

and

other

vested

interests

of

the

tobacco

industry

in

accordance

with

national

law.

82

Guidelines

ontheimplementationofthisprovisionwereagreedtobythethirdConferenceofPartiestotheTreatyin

November2008.Theseguidelinesrecommendagainstownershiporinvestmentsintobaccocompanies.

7.2PartiesthatdonothaveaStateownedtobaccoindustryshouldnotinvestinthetobaccoindustryand

relatedventures.PartieswithaStateownedtobaccoindustryshouldensurethatanyinvestmentinthe

tobaccoindustrydoesnotpreventthemfromfullyimplementingtheWHOFrameworkConventionon

TobaccoControl.83

Despitethis,thegovernmentofCanadaandQuebec,whichhavebothformallyapprovedthetreaty,continueto

investpublicfundsintobaccocompanies,notablythroughtheinvestmentofCanada/QuebecPensionPlan

contributions.PublicpensionfundsmanagedbyotherlevelsofCanadiangovernment(suchastheOntario

TeachersPension

Plan,

the

British

Columbia

Investment

Management

Corporation,

the

Ontario

Municipal

EmployeesRetirementSystemalsoinvestintobaccocompanies.84

Othergovernmentshavechosentonotinvestintobacco. InOctober2007,theNewZealandSuperannuationFund

decidedinOctober2007todivestoftobaccostocks,85

andinApril2009theNorwegianMinisterofFinance

announcedthatcountrywouldnolongerinvestintobaccoandotherharmfulindustries.86

Asaresultoftheseinvestments,thefinancialbenefitstoCanadians/Quebecersofinternationaltobaccosalesfar

exceedthesupportCanadiansgivetoreducingtobaccouseworldwide. ThevalueoftheCPP/QPPholdingsin

tobaccoexceedsCDN$400million,andthedividendrevenuein2009isestimatedatCAD$25million.[Itisnot

possibletocalculateexactlythedividendincomeofthesefundswiththeinformationavailable,butestimates

basedon

share

value

declared

in

past

year

and

declared

holdings

are

presented

in

the

tables

below.]

TABLE4.2A:TOBACCOHOLDINGSOFTHECAISSEDEDPTETDEPLACEMENTDUQUBEC,ASOFDECEMBER31,2008,ESTIMATEDVALUEOFDIVIDENDSRECEIVEDFROMTOBACCOSALESBASEDONTHOSEHOLDINGS.

87

COMPANY DECLAREDDIVIDEND

NUMBEROFSHARESHELDBY

CAISSE

DECLAREDVALUEOFSHARES($CDN)

REVENUESFROMDIVIDENDS($CDN)

B

Altria $1.28 297,300 $5,500,000 $466,014.18

BritishAmericanTobaccoMalaysia $0.75 73,200 $1,200,000 $67,230.54

BritishAmericanTobaccoPLC 1.22 515,636 $16,500,000 $770,366.37

ImperialTobaccoGroupPLC 1.12 340,759 $11,200,000 $467,368.69

ITC(IndianTobaccoCompany) $0.08 869,572 $3,800,000 $85,190.23

JapanTobacco

Inc

55

2,269

$9,100,000

$152,823.96

KT&G(KoreaTobacco&Ginseng) $2.23 161,256 $12,500,000 $440,367.24

Lorillard $4.67 880,740 $61,300,000 $5,036,848.13

PhilipMorrisInternational $2.16 287,400 $15,400,000 $760,212.09

ReynoldsAmerican $3.40 1,900 $100,000 $7,910.92

SouzaCruz $1.70 31,964 $800,000 $66,543.29

SwedishMatchAB $0.52 217,478 $3,800,000 $138,488.25

Total 3,679,474 $141,200,000 CDN$8,459,363US$6,907,859

ValueofsharesasdeclaredintheAnnualReportforDecember31,2008;bCurrencyconvertedforDecember31,2008.


29/47


30/47

24

Governmentexpendituresontobaccocontrolareasmallfractionoftherevenuestheyreceivefromtobaccosales.

Governmentsarerequestedbutnotrequiredtoreporttheirexpendituresontobaccocontrolactivitiestothe

WorldHealthOrganization. WHOhascollecteddataondomestictobaccocontrolexpendituresthroughthe

developmentofitsMPOWERreport,89

andhascollectedinformationontransnationalexpenditures(i.e.supportto

developingcountries)duringthecourseofresearchfortheFrameworkConventiononTobaccoControl.90

AlmosthalfofthemembernationstotheWorldHealthOrganizationrespondedtotheMPOWERreportrequest

forinformationonexpenditures. Thetotalspentbythose78countrieswas$375million,withthelargestbudgets

reportedbytheUnitedKingdomandCanada(seetable4.1below).Thetotalfigureislikelytobemuchhigher,as

somelargeeconomieswithadvancedtobaccocontrol(suchastheUnitedStates)didnotreportandbecausethe

tobacco

control

expenditures

of

states,

provinces,

cities

and

other

sub

national

governments

were

not

necessarily

included. Eveniftherealamountspentisfourtimesashighastheamountreported,itwouldstillbeonly1%of

thegovernmentrevenuesfromtobaccosalesofreportedinTable3.1above.

Theglobaltrickleofsupportfortobaccocontrol.

Thebenefittoeconomiesfromthetransbordershipmentofprofitsfromtobaccosalesgreatlysurpassesthe

supportacrossnationsfortobaccocontrolefforts.Effortstosupportglobaltobaccocontrolincludedtheworkof

theWorldHealthOrganization(bothitsTobaccoFreeInitiativeandtheSecretariatoftheFrameworkConvention

onTobaccoControl),BloombergPhilanthropies,bilateralaidandotherprogramsofgovernmentalinternational

developmentagencies,liketheSwedishInternationalDevelopmentAgencyandprojectactivitiesofnon

governmental

organizations

like

the

Framework

Convention

Alliance

or

Global

Smokefree

Partnerships.

They

also

includethesupportofphilanthropicorganizations,liketheBloombergFoundationandtheGatesFoundation.

DevelopmentAssistanceforTobaccoControl.

In2005,thesecretariattotheFrameworkConventiononTobaccoControlattemptedtoidentifyandquantify

existingandpotentialsourcesoftransnationalsupportfortobaccocontrolinitiatives.Althoughthestudyfinally

concludedthatitwasimpossibletoprovideaclearindicationoftheamountsoffundingeitherprovidedor

availableforprovisionacrossnationalboundaries,itdidcanvasdonornations(allOECDmembers)and

internationaldonoragenciesandidentifiedparties(7),othernations(1),intergovernmental(1)orinternational

organizations(5)whichhadprovidedtransnationalsupportfortobaccocontrolinitiativesinthepreceding5

years.91

Neithertheaggregatenorindividualamountsofthesupportfromthose14donorswasmadepublic.

ByMay2009,111partiestotheFCTChadhadtheirfirstreportsmadeavailableontheofficialFCTCwebsite.92

Partieswererequiredtoreport,amongotherthings,onwhethertheyhadprovidedorreceivedfinancialor

technicalassistanceandtowhomthisassistancehadbeenprovidedtoorreceivedfrom. Thesereportsshowed

thatthenumberofFCTCpartieswhowerealsoOECDmembersandwhoidentifiedasprovidingsupporthadgrown

to12.Thirtyoneotherpartiesidentifiedthattheyhadprovidedsupport,and61partiesidentifiedthattheyhad

receivedassistance.Partieswererequestedtoidentifytowhomassistancehadbeenprovidedorfromwhomit

hadbeenreceived,andthoughnotalldid,108provisionsofassistancewereidentified,andtheWorldHealth

5


31/47

Organizationwasbyfarthemostfrequentprovider.Table4.2showstheresultsandFigure4.1illustratesthe

reportingtoolrequiredofFCTCparties.93

Wearenotawareofanypublishedestimatesofglobalfundingfortobaccocontrol.Attemptstoquantifyglobal

fundingfordevelopmentassistanceforhealthhaveidentifiedotherdiseaseorobjective,buthavenotincluded

tobaccocontrol.TheBloombergPhilanthropies,whichasoneofthelargerknowncontributorstotobaccocontrol

maybewellsituatedtoassessthesituationestimatesthatUS$200millionisspentontobaccocontrolgloballyin

2007.94

ExpenditureslikelyincludedintheabovearetheUS$6.5millionannualbudgetforthefunctioningofthe

FrameworkConventiononTobaccoControl,95

theundisclosedbudgetoftheWHOTobaccoFreeInitiative(partofa

US$80millionbudgetfortobacco,alcohol,drugs,unhealthydiets,physicalinactivityandunsafesex),96

theannual

expenditureofthesixyear$375millionBloombergInitiativetoReduceTobaccoUse,averagedatUS$62million

peryear,andanadditional$125millioncontributionfromtheBillandMelindaGatesFoundationover5years

(annualizedat$25millionperyear),97

andthebilateralsupportofcountrieslikeCanada,whoseannual

expenditureontobaccocontrolaveragedatslightlyunderCDN$1millioninrecentyears.98

TABLE5.1: THEOVERALLNATIONALBUDGETFORTOBACCOCONTROLACTIVITIES,ASREPORTEDTOTHEWORLDHEALTHORGANIZATIONANDTHEOFFERINGORRECEIPTOFINTERNATIONALASSISTANCEFORTOBACCOCONTROL.99

100

COUNTRY FUNDINGFORTOBACCOCONTROLMPOWERUS$EXCHANGE2006

FCTCPARTY

FCTCREPORTASSISTANCEGIVEN

FCTCREPORTASSISTANCERECEIVED

FCTCASSESSMENT20102011

BUDGET(US$)

Afghanistan

Albania yes yes $680

Algeria $0 yes $9,635

Andorra

Angola $0 yes $340

Antiguaand

Barbuda

yes

$227Argentina $867,000

Armenia yes yes $227

Australia $2,651,515 yes yes $202,567

Austria yes $100,553

Azerbaijan yes $567

Bahamas

Bahrain yes $3,741

Bangladesh $50,000 yes yes yes $1,133

Barbados yes $1,020

Belarus yes $2,267

Belgium $291,139 yes $124,923

Belize $12,400 yes yes $113

Benin yes $113

Bhutan

$29,000

yes

yes

$113

Bolivia yes $680

BosniaandHerzegovina yes *

Botswana yes yes yes $1,587

Brazil $4,608,295 yes yes yes $99,306

BruneiDarussalam yes yes yes $2,947

Bulgaria yes yes $2,267

BurkinaFaso $31,150 yes yes yes $224

Burundi $0 yes yes yes $113

Cambodia $1,637 yes yes $113


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26


FCTCPARTY




BUDGET(US$)

Cameroon $0 yes $1,020

Canada $64,247,788 yes yes $337,465CapeVerde $17,880 yes $113

CentralAfrican

Republic

$16,065 yes $113

Chad $100,518 yes $113

Chile $780,720 yes yes $18,249

China $1,204,517 yes $302,326

Colombia yes $11,902

Comoros $22,185 yes *

Congo $0 yes $113

CookIslands $12,987 yes yes $113

CostaRica yes $3,627

Cted'Ivoire $53,051

Croatia yes $5,667

Cuba

Cyprus $30,544 yes $4,987

CzechRepublic

SouthKorea yes $798

DRCongo $0 yes $340

Denmark $3,619,529 yes $83,777Djibouti $2,926 yes $113

Dominica yes $113

DominicanRepublic $0

Ecuador yes yes yes $2,380

Egypt $12,500 yes $9,975

ElSalvador

EquatorialGuinea yes $227

Eritrea

Estonia $56,180 yes $1,814

Ethiopia

EuropeanCommunity yes yes $283,374

Fiji yes yes yes $340

Finland $1,597,468 yes yes $63,929

France $37,959,881 yes yes yes $714,273

Gabon

yes *Gambia $0 yes $113

Georgia yes yes $340

Germany $1,265,823 yes yes $972,280

Ghana $257,059 yes $453

Greece yes $67,556

Grenada yes $113

Guatemala yes yes yes $3,627

Guinea $0 yes $113

GuineaBissau yes *

Guyana yes yes $113

Haiti

Honduras yes yes $567

Hungary $202,006 yes yes $27,657

Iceland yes $4,194

India $551,876 yes yes $51,007

Indonesia

Iran $2,000,000 yes $20,403

Iraq yes $1,700

Ireland $2,531,646 yes yes $50,441

Israel yes $47,494

Italy $14,374,644 yes $575,749

Jamaica $103,039 yes yes yes $1,133

Japan $4,256,600 yes yes $1,762,200

Jordan $93,986 yes yes yes $1,360

Kazakhstan yes $3,287

Kenya $30,000 yes $1,133


33/47


FCTCPARTY




BUDGET(US$)

Kiribati yes $113

Kuwait $181,638 yes yes $20,630

Kyrgyzstan yes yes $113

LaoPeople's

DR

yes $113

Latvia $26,786 yes yes $2,040

Lebanon $30,000 yes $3,854

Lesotho $6,130 yes yes yes $113

Liberia

LibyanArabJamahiriya yes $7,028

Lithuania $21,818 yes $3,514

Luyesembourg yes $9,635

Madagascar $16,014 yes yes yes $227

Malawi

Malaysia yes $21,536

Maldives yes yes $113

Mali $5,737 yes $113

Malta $81,826 yes $1,927

MarshallIslands yes $113

Mauritania yes $113

Mauritius

$11,199 yes yes $1,247

Meyesico yes yes yes $255,853

Micronesia yes yes $113

Monaco

Mongolia yes yes yes $113

Montenegro yes yes $113

Morocco

Mozambique

Myanmar yes yes $567

Namibia yes $680

Nauru yes yes yes $113

Nepal yes $340

Netherlands $18,987,342 yes yes $212,315

NewZealand $19,480,519 yes yes $29,018

Nicaragua yes $227

Niger

$34,424 yes yes yes $113

Nigeria $418,984 yes yes $5,441

Niue $0 yes yes $113

Norway $6,864,275 yes yes $88,651

Oman $84,211 yes $8,275

Pakistan $82,960 yes yes $6,688

Palau $36,000 yes yes $113

Panama yes yes yes $2,607

PapuaNewGuinea yes $227

Paraguay $33,830 yes yes yes $567

Peru yes yes yes $8,841

Philippines $9,745 yes yes $8,841

Poland $161,290 yes $56,788

Portugal yes $59,735

Qatar $96,978 yes yes $9,635

RepublicofKorea $32,991,915 yes yes yes $246,332

Republicof

Moldova

yes

Romania yes yes $7,934

RussianFederation yes $136,031

Rwanda $69,602 yes $113

SaintKittsandNevis

SaintLucia yes $113

SaintVincent&Grenadines

Samoa yes yes $113

SanMarino yes $340

SaoTomeandPrincipe yes $113

SaudiArabia $2,540,107 yes yes yes $84,797


34/47

28


FCTCPARTY




BUDGET(US$)

Senegal $95,622 yes yes $453

Serbia yes yes yes $2,380

Seychelles $20,000 yes yes $227

SierraLeone

yes

Singapore yes yes $39,332

Slovakia $22,173 yes yes $7,147

Slovenia $47,117 yes yes $10,882

SolomonIslands yes $113

Somalia

SouthAfrica $221,566 yes yes $32,871

Spain yes $336,445

SriLanka yes $1,814

Sudan $4,421 yes yes $1,133

Suriname

Swaziland yes $227

Sweden $4,070,556 yes $121,409

Switzerland

SyrianArabRepublic $133,690 yes $1,814

Tajikistan

Thailand

$131,996 yes yes yes $21,083

TheformerYugoslavRepublicof

Macedonia

yes $567

TimorLeste yes $113

Togo $38,249 yes $113

Tonga yes $113

TrinidadandTobago yes $3,060

Tunisia

Turkey yes $43,186

Turkmenistan

Tuvalu yes $113

Uganda $1,092 yes $340

Ukraine yes yes $5,101

UnitedArabEmirates yes yes yes $34,232

UnitedKingdom $138,888,889 yes yes $752,925

United

Republic

of

Tanzania

$11,183 yes $680

UnitedStatesofAmerica

Uruguay yes yes $3,060

Uzbekistan

Vanuatu yes $113

Venezuela $4,657,662 yes yes $22,670

VietNam $10,000 yes yes $2,270

WestBankandGazaStrip $30,000

Yemen $25,000 yes $793

Zambia $6,057 yes $113

Zimbabwe $0

Notreported;*BecameanFCTCPartyafterthepreparationofthebudgetpresentedatCOP3.Sources: WHOMPOWERreport. FCTCPartyPhaseIreports;FCTCDecisionsofCOP3


35/47

TABLE5.2:FCTCPARTYREPORTSMADEPUBLICBYMAY1,2009.

TOTAL WORLDBANKINCOMEGROUP:

High

Income

Middle

Income

Low

Income

Noincome

group

Numberof

parties

reporting

111

37

54

16

4

Partiesreportingtheyprovidedassistance 43 17 19 5 2

Partiesreportingtheyreceivedassistance 61 10 38 12 3

Partiesreportingtheybothprovidedandreceivedassistance 14 5 17 5 2

Nationsoragenciesmostfrequentlyidentifiedasproviderofsupport andnumberoftimesmentionedbyincomegroupofrecipientparty

WorldHealthOrganization 47 8 29 8 2

CentreforDiseaseControl,USA 13 1 11 1

UnitedStatesofAmerica 5 1 4

NewZealand 4 1 1 2

EuropeanUnion 4 1 3

InternationalDevelopmentResearchCentre,Canada 3 1 2

Canada

3

2

1

FrameworkConventionAlliance 3 2 1

Allothermentions 26 6 16 3 1Source:FCTCSecretariat:ReportssubmittedbyParties

FIGURE5.1: PHASE1REPORTINGTOOLS:QUESTIONSONTECHNICALANDFINANCIALASSISTANCE.


36/47

30

Tobaccocontrolisunderfundedcomparedwithotherpreventablediseases.

Thegapbetweengovernmentrevenuesfromconsumertaxesontobaccosalesandincometaxesontobacco

manufacturingismatchedbyagapbetweenexpendituresonthepreventionoftobaccocauseddiseasesandother

preventablediseases.

TheWorldHealthOrganizationestimatesthatthenumberofdeathscausedbytobaccowouldcauseitcurrentlyto

rankasthethirdleadingcauseofdeathworldwide,aheadofdiseaseslikeHIV/AIDS,tuberculosisandmalaria

whichhavebeenidentifiedbytheMilleniumDevelopmentGoals101

asatargetforglobalaction. Asshowninthe

tablesbelow,tobaccoisestimatedtocurrentlycausedmoredeathsthanHIV/AIDS,tuberculosisandmalaria

combined,yetthefundingprovidedtoreducetobaccouseislessthan3%oftheamountprovidedforthethree

prioritydiseases.

DEATHSFROMTOBACCOUSE,TUBERCULOSIS,MALARIAANDHIV/AIDS.

WHOrecentlyupdateditsprojectionsofmortality

fromleadingcausesofdisease.102

Toreflectthe

variousoutcomesthatcouldreasonablyariseunder

differingscenariosofhealthprogramming,they

establishedbaseline,optimisticandpessimistic

predictionsforeachmajorcausesofdisease: under

allscenarios,deathsfromtobaccoandHIV/AIDS

wereexpectedtoincrease,whereasdeathsfrom

tuberculosisandmalariawereexpectedtofall.(Data

shownin

Figure

5.1).

GLOBALFUNDINGTOPREVENTDEATHSFROMTOBACCOUSE,TUBERCULOSIS,MALARIAANDHIV/AIDS.

Globalfundingfortobaccoiscurrentlymuch

smallerthanfortheotherprioritydiseases,as

showninTable5.2andFigure5.1below.103

104

105 Internationalfinancingisprovidedforeach

personlivingwithHIV/AIDSintheamountof

$154peryear.Foreachpersonlivingwith

malariaortuberculosis,theamountisUS3and

$50respectively.Butforeachoftheworlds

tobaccousers

only

US$

0.18

is

made

available.

Ifonlysmokersindevelopingcountriesare

considered(asgovernmentsinrichercountries

maynotbeinneedofinternationalfinancing

tomanagetheirhealthprogramming),that

amountincreasesto$0.22cents.

6


37/47


38/47

32

Newfundingmechanismsforglobalhealthhavenotyetbenefittedtobaccocontrol.

Fundingforglobalhealth

initiativeshas

increased

markedlyinrecentyearsfor

alldiseasecontrol,including

tobaccocontrol.U.S.

researchersestimatethat

developmentassistancefor

healthhasincreasedby

US$9billionfrom2002to

2007(fromUS14.4billionto

US$23.7billion).110

Inthis

context,annualfundingof

$200million

for

tobacco

control(estimatedto

currentlycausealmost10%

oftheworldsdeaths)isnot

muchmorethanarounding

erroringlobalfundingforhealth.

Thereisyetnoglobalmechanismestablishedtofunctionasamechanismtoprovidetransnationalfundingfor

tobaccocontrol.Thisisunlikethesituationfortuberculosis,immunization,HIV/AIDSandmalaria,whereseveral

fundingmechanisms havebeenestablished. Theyinclude:

PRIVATEPUBLICFINANCIALINSTRUMENTSFORGLOBALHEALTHFUNDING

TheGlobalFundtoFightAIDS,TuberculosisandMalaria(GFATM)

Thispublicprivatepartnershipfunctionsasafinancial

instrumenttoraiseandchannelfundstofightAIDS,TBand

Malaria.WhiletheUnitedStatesisthelargestdonortothe

fund(andprovidesaboutonethirdofitsrevenue),other

nationsalsodonate,asdophilanthropicorganizationsliketheBillandMelindaGatesFoundation,private

sectorenterprises. TheGlobalFundwasagreedtobymemberstatesoftheUnitedNationsinJune2001,

followingaspecialUNsessiononAIDS.Itwasformallyestablishedsixmonthslater,ininJanuary2002.111

By

early2008,thefundhadapproved572grantswithatotalvalueofUS$10.7billion. About61%ofthefunds

expendituresareonHIV/AIDS,withmalariaprogrammingreceiving25%andtuberculosis14%. Thefund

establishesthatitprovidesabouttwothirdsoftheinternationalfinancingforTBandmalaria,andaboutone

fifthofthefundingforHIV/AIDS.112

113

7

7 TheGlobalFundestimatesthatUS$107millionisprovidedtomalariacontrolthroughbilateralfunding,$63

millionthroughmultilateralfundingand$4.4millionthroughprivateorotherdonations.


39/47


40/47

34

(RED)

(RED)isacausemarketinginitiativelaunchedbyBonoandBobbyShrivertoengage

theprivatesectorinthefightagainstAIDSinAfrica.Currentparticipatingcompanies

areAmericanExpress(UKonly),Converse,Gap,EmporioArmani,Dell,Windows,

Apple,HallmarkandStarbucks.Through(RED),establishedbrandspayalicensingfee

to

(RED)

and

agree

to

marketing

requirements,

and

market

their

RED

products

to

consumers.AportionofprofitsonREDproductsgotoGlobalFundfinancedAIDSprogramsinAfrica(e.g.1%

ofspendingontheAmericanExpressREDcard,50%ofprofitonGapREDapparel).Withinthefirst3years,

US$120millionhadbeenraisedthroughsaleof(RED)products.119

Debt2Health

Thisfinancialinstrument,initiatedinApril2007,

usesdebtswapstomakedomesticresources

availableforprogrammesundertheGlobalFund

forAIDS,tuberculosisandmalaria.Underthis

program,theGlobalFundfacilitatesathreeparty

agreementbetweenitselfandcreditorsand

grantrecipientcountries.Creditornationsforgo

repaymentofaportionoftheirclaimsonthe

conditionthatthebeneficiarycountryinvestsan

agreeduponcounterpartamountinGlobalFund

approvedprograms.120Thefirstthreeparty

Debt2HealthAgreementwassignedbetween

Germany,IndonesiaandtheGlobalFund.

TABLE6.3: GLOBALHEALTHFUNDINGBYCHANNELOFASSISTANCE121

CHANNEL

2007

US$millions

BilateralDevelopmentAgencies 7,398

RegionalDevelopmentBanks

AfricanDevelopmentBank(AFDB) 85

AsianDevelopmentBank(ASDB) 135

InterAmericanDevelopmentBank(IDB) 167

WorldBank

InternationalDevelopmentAssociation(IDA) 819

InternationalBankforReconstructionandDevelopment(IBRD) 370

UnitedNations

UnitedNationsJointProgrammeonHIV/AIDS(UNAIDS) 220

UnitedNationsPopulationFund(UNFPA) 575

UnitedNationsChildren'sFund(UNICEF) 722

WorldHealth

Organization

(WHO)

1,541

EuropeanCommission(EC)1 521

GlobalHealthPartnerships

GlobalAllianceforVaccines&Immunization(GAVI) 918

GlobalFundAgainstAIDS,Tuberculosis&Malaria(GFATM) 1,799

Bill&MelindaGatesFoundation(BMGF) 855

OtherFoundations2 287

NonGovernmentalOrganizations(NGOs)2 5,375

Total 21,788Source: Institute for Health Metrics and Evaluation. Financing Global Health 2009

Board Meeting 22 Geneva, Switzerland 25-27 March 2007

The D2H Mechanism

Debt2Health Mechanism

BENEFICIARYCOUNTRY Counter-

part

Fund

The Global Fund

Principal Recipient

GLOBAL FUNDPROGRAM

cancels agreed debt

pays

counterpartfunds at agreed

conditions

honors disbursement

requests from PR

2

1

3

CREDITOR


41/47

Potentialnewfundingsourcesfortobaccocontrol.

Asdiscussed,nationalandsubnationalgovernmentsarecollectivelyinreceiptofmorethan$160billionin

revenuessourcedfromtobaccosalesintheformofexciseandothertobaccospecificduties,andoffurther

amountsintheformofprofitsharingfromtobaccoearnings.

InnovationsinCanada

Nointernationalfinancialinstrumenthasyetbeenestablishedtoconvertaportionofthisrevenueintoresources

fornationalorglobaltobaccocontrol. Tax

innovationsthatofferexamplesofhowthiscould

structuredhavebeeninitiatedinCanadaand

elsewhere,including:

ASURTAXONCORPORATEPROFITS.

Since1994,tobaccomanufacturersoperatingin

Canadahavebeensubjecttoasurtaxontheir

tobaccobasedrevenues.122

FinanceCanadareportsthatthishasgeneratedmorethan$750millioninadditional

revenuesover the15yearsithasbeencollected.123

Whenthissurtaxwasfirstimposedin1994atarateof40%it

wascalledahealthpromotionsurtax,124

althoughthenamewaslaterchangedwhenthetaxwaspermanently

imposedandincreasedtoarateof50%.125

ALEVYONTOBACCOPRODUCTSPAIDBYCOMPANIES

In1998,thegovernmentofBritishColumbiaintroducedtheTobaccoFeeActwhichwaspassedbytheB.C.

LegislativeAssemblyonJuly30,1998.126TheTobaccoFeeActimposedalicensingfeeofCDN$20milliontobe

collectedfromCanada'sthreemajortobaccofirmsinproportiontotheirmarketshare.Thisfeeistobespenton

antismokingandsmokingcessationprograms.Apricecontrolmechanismprohibitstobaccocompaniesfrom

passingthiscostontoconsumers. Whilehighpricesaregenerallyseenasadeterrenttosmoking,thegovernment

ofB.C.wantsthecostoftheseprogramstobepaidbytheindustryanditsshareholders,notbysmokers.The$20

millionrepresentsapproximatelythecostsoftobaccoindustrypromotionintheprovinceatthattime.127

(The

measurewasneverimplemented,followingthreatsbytheindustrytoremovetheirproductsfromthemarketin

BritishColumbiaandrelinquishtheirtradetoillicittraders).128

DEDICATEDTOBACCOTAXES.

Switzerlanddedicates2.6centimesfromeverypackageofcigarettessoldtoaTobaccoPreventionFund,whichis

managedbytheFederalOfficeofPublicHealth. Apprxoximately$18millionFrancsarereceivedeachyear.The

fundisusedtosupportactivitiesofcivilsocietyorganizationsandothers.129

PROCEEDSFROMTOBACCOLITIGATION

Canadiangovernmentsresolvedtheirfirstjointlitigationeffortsagainsttobaccocompaniesin2008,whenthey

agreedtoasettlementof$1.1billionasaresolutionofallpotentialclaimsinrelationtoBAT/ImperialTobacco

CanadaLtdsandRothmansBenson&Hedgesinvolvementinthemovementofcontrabandtobaccointheearly

1990s.130

Federalgovernmentrevenuesfromthisinitiativein20082009were$300million,anamountthatwas

pledgedthenextdaytoaprogramtoassisttobaccofarmersinmovingawayfromtobaccogrowing.131

Fundsfrom

theU.S.MasterSettlementAgreementwerealsoassignedtotobaccocontrolinitiatives.132


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36

Appendix

NATIONALGROSSDOMESTICPRODUCT(2008)133

ANDTOBACCOINDUSTRYREVENUES,INCOME,PROFITSANDTAXESPAID.

Rank Country GDP$USmillions

1 UnitedStates 14,204,322EUROArea 13,565,479

2 Japan 4,909,2723 China 3,860,0394 Germany 3,652,8245 France 2,853,0626 UnitedKingdom 2,645,5937 Italy 2,293,0088 Brazil 1,612,5399 Russian

Federation

1,607,816

10 Spain 1,604,174

11

Canada

1,400,09112 India 1,217,490

13 Mexico 1,085,95114 Australia 1,015,21715 Korea,Rep. 929,12116 Netherlands 860,33617 Turkey 794,22818 Poland 526,96619 Indonesia 514,38920 Belgium 497,58621 Switzerland 488,47022 Sweden 480,02123 SaudiArabia 467,60124 Norway 449,99625 Austria 416,38026 Iran,Islamic

Rep.

385,143

27 Greece 356,79628 Denmark 342,67229 Argentina 328,38530 Venezuela, RB 313,79931 Ireland 281,77632 SouthAfrica 276,76433 Finland 271,28234 Thailand 260,69335 Portugal 242,68936 Colombia 242,268

TotalRevenuesBig5

233,438

37 CzechRepublic 216,48538 HongKong,

China

215,355

39 Nigeria 212,08040 Romania 200,07141 Israel 199,49842 Malaysia 194,92743 Singapore 181,94844 Ukraine 180,35545 Algeria 173,88246 Chile 169,45847 Pakistan 168,27648 Philippines 166,90949 UnitedArab 163,296


Emirates

50 EgyptArabRep. 162,818 Government

IncomeandExcisetaxrevenues

160,000

51 Hungary 154,66852 Kazakhstan 132,22953 NewZealand 130,69354 Peru 127,434 Tobaccoexcise

taxespaid Big5114,068

55 Kuwait

112,11656 Libya 99,92657 SlovakRepublic 94,95758 Vietnam 90,70559 Morocco 86,32960 Angola 83,38361 Bangladesh 78,99262 Croatia 69,332 Revenue

JapanTobacco64,326

RevenuePhilipMorrisInt

63,640

63 Belarus 60,30264 Sudan 58,44365 SyrianArab

Republic

55,204

66 Slovenia

54,61367 Luxembourg 54,25768 Qatar 52,72269 Ecuador 52,57270 Serbia 50,06171 Bulgaria 49,900 Revenue BAT 49,57272 Lithuania 47,34173 Azerbaijan 46,25974 Dominican

Republic

45,790

75 SriLanka 40,71476 Tunisia 40,18077 Guatemala 38,977 Revenue

ImperialTobacco

36,544

78 Oman 35,72979 Kenya 34,50780 Latvia 33,78381 Uruguay 32,18682 CostaRica 29,83483 Lebanon 28,660 Operating

IncomeBig528,019

84 Uzbekistan 27,91885 Yemen,Rep. 26,576


86 Ethiopia 26,48787 Trinidadand

Tobago

23,898

88 Cted'Ivoire 23,41489 Cameroon 23,39690 Estonia 23,08991 Panama 23,08892 ElSalvador 22,11593 Cyprus 21,27794 Tanzania 20,49095 Jordan 20,013

Revenue

Altria

19,356

96 Macao,China 18,59997 Equatorial

Guinea

18,525

98 BosniaandHerzegovina

18,452

99 Turkmenistan 18,269ProfitBig5 16,905

100 Bolivia 16,674101 Iceland 16,658102 Ghana 16,123103 Paraguay 15,977104 Bahrain 15,828105 Jamaica 15,068106 Uganda 14,529107 Gabon 14,435

108 Zambia

14,314109 Honduras 14,077110 Senegal 13,209111 Botswana 12,969112 Georgia 12,793113 Nepal 12,615114 Albania 12,295115 Armenia 11,917116 Congo,Dem.

Rep.

11,588

117 ChannelIslands 11,515118 Brunei

Darussalam

11,471

119 Congo,Rep. 10,699120 Afghanistan 10,170121 Mozambique 9,735122 Cambodia 9,574123 Macedonia,FYR 9,521124 Madagascar 8,970125 Mali 8,740126 Mauritius 8,651127 Namibia 8,564

DividendpaymentsissuedbyBig5

8,476

128 Chad 8,361129 PapuaNew 8,168


43/47


Guinea

130 BurkinaFaso 7,948Corporateincometaxespaid Big5

7,678

131 Malta 7,449132

Haiti

6,953

133 Bahamas,The 6,935ProfitPhilipMorrisInt.

6,890

134 Benin 6,680135 Nicaragua 6,592136 Moldova 6,048137 Bermuda 5,855138 LaoPDR 5,431139 Niger 5,354140 Mongolia 5,259141 Tajikistan 5,134142 Montenegro 4,521143 Rwanda 4,457144 KyrgyzRepublic 4,420

145

Malawi

4,269

146 Guinea 4,266ProfitBAT 3,886

147 Fiji 3,527


148 IsleofMan 3,437149 Barbados 3,409 Profit ALTRIA 3,133150 Suriname 2,881151 Mauritania 2,858152 Togo 2,823153 Swaziland

2,618

154 CentralAfricanRepublic

1,970

155 SierraLeone 1,953 Profit Imperial

Tobacco1,739

156 CapeVerde 1,730157 SanMarino 1,703158 Eritrea 1,654159 Lesotho 1,622160 Belize 1,367161 Bhutan 1,359162 Maldives 1,260 Profit Japan

Tobacco1,256

163 Antigua

and

Barbuda 1,225

164 Burundi 1,163165 Guyana 1,158


166 St.Lucia 1,011167 Djibouti 875168 Liberia 870169 Seychelles 833170 Gambia,The 782171 SolomonIslands 647172 Grenada

638

173 St.VincentandtheGrenadines

594

174 Vanuatu 574175 St.Kittsand

Nevis

540

176 Comoros 530177 Samoa 52178 TimorLeste 498179 GuineaBissau 430180 Dominica 364181 Tonga 264182 Micronesia,Fed.

Sts.

247

183 Palau 182

184 So

Tom

and

Principe175

185 MarshallIslands 158186 Kiribati 131


44/47

38

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York,

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45/47

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57

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on

dividends

issued

and

shares

held

as

stated

in

Japan

Tobacco

Annual

report

2008.

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of

Finance.

Thai

Tobacco

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7

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