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CIGoutlet Tobacco News
American cigarette manufacturers have filed a lawsuit against the FDA.
The largest US tobacco companies filed a lawsuit in the US District Court for the District of Columbia against the Federal Office of the Food and Drug Administration (FDA).
read more ...05/04/15
Interesting facts about cigarettes, countries - tobacco leaders.
Every minute in the world are sold about 8-10 million cigarettes and daily 13-15 billion cigarettes.
read more ...04/01/15
Anti-smoking campaigns run to extremes.
It is strange to what can bring the foolishness of anti-smoking crusaders in their attempts to impose all the rules of a healthy lifestyle, even if they lead to a violation of all norms, artistic freedom and civil society.
read more ...03/03/15
States Face Lost Revenue from Tobacco Tax Hikes


MIAMI/NEW YORK (Reuters) - Lawmakers who hiked cigarette taxes in search of needed cash may find themselves in the precarious position of losing a chunk of the billions of dollars their states receive from the nation's top tobacco companies.

By boosting excise taxes to more than $1 per pack in some cases, states have pushed smokers to abandon their brands or quit altogether. That in turn has threatened the profit picture for leading U.S. cigarette makers, analysts say. Under a 1998 agreement with 46 states, the Big Four tobacco companies are to pay $206 billion over 25 years to compensate governments for the cost of caring for sick smokers. Those settlement payments, however, are based on consumption and the tobacco companies' share of the market every year -- both of which are clearly shrinking due to higher retail cigarette prices, analysts and executives say. "The distributions depend in large part on domestic tobacco consumption," said Chris Atkins, director of tax and fiscal policy at the American Legislative Exchange Council. "You raise taxes, you decrease consumption and states risk losing money." Tobacco executives say consumption will continue to drop, a development analysts say gives manufacturers ammunition to seek a big decrease in payments to states. Manufacturers had anticipated a drop in consumption at low single-digit rates. "We think we're experiencing something substantially greater than that," Andrew Schindler, chairman and chief executive of R.J. Reynolds Tobacco Holdings Inc., said in a conference call in late April. "I can't quite explain at this point, but I am confident we've got a consumption decline that's way different than what we thought." RJR said the decline in consumption of its brands could be as much as 8 percent to 10 percent this year. Cash-strapped state governments have been using money from the Master Settlement Agreement to shore up their tattered budgets, funding programs from education to health care and selling bonds backed by the settlement funds. "State and local governments have a clear incentive to keep the major tobacco manufacturers out of bankruptcy," said Triet Nguyen, president of credit research service Axios Advisors. Nguyen said state finances are now "hopelessly intertwined" with tobacco companies' fortunes. What's more, he noted, the manufacturers that did not sign the settlement agreement have captured a far greater-than-expected share of the market. "The MSA set up in 1998 assumes a 5 percent market share for the non-participating manufacturers. That percent has turned out to be a lot higher," he said. GLARING DEPENDENCE State governments, in fact, have become reliant on cigarette makers for revenue, analysts say, pointing to last month's nationwide brouhaha over Philip Morris' ability to come up with a $12 billion court-ordered bond required to protect its assets while appealing an Illinois lawsuit. That whopping figure raised doubt that the cigarette maker, part of Altria Group Inc., could make its scheduled $2.6 billion payment to states, or even avoid bankruptcy. Tobacco bonds, the debt sold by states backed by money from the Master Settlement Agreement, tumbled. At worst, yields on some tobacco bonds pushed well above 8 percent. Wall Street's leading credit houses immediately put the debt on their watch lists, saying the bonds could be cut to junk status. State attorneys general, the same group previously at odds with the industry over health care costs, rallied to support Philip Morris' motion for a lower appeal bond. "That's a perfect indication of how states have become dependent on tobacco as a source of revenue," Atkins said. The judge in the case cut the bond required nearly in half, but with states' vulnerability already exposed, Wall Street and fiscal analysts expect the tobacco companies to move now for a reduction in payments under the settlement agreement. CONNECTING DOTS Nearly half of state legislatures have turned to tobacco tax increases as income tax revenue remains stubbornly weak. State tobacco excise taxes range widely, from 3 cents in one tobacco-growing state to as much as $1.51 per pack elsewhere. With local and federal taxes, that has pushed the price of a pack of Marlboro cigarettes in New York City to $7.50, for example. The No. 1 and No. 2 U.S. tobacco companies -- Philip Morris and R.J. Reynolds -- clearly blame taxes in part for falling consumption last quarter. "I would say excise taxes are at the core of this," R.J. Reynolds' Schindler told an analyst on a company conference call. Seven of the 10 top brands have lost market share. The market share of the Big Four -- Philip Morris, R.J. Reynolds, British American Tobacco Plc's Brown & Williamson and Loews Corp.'s Lorillard -- has gone to 91.45 percent from 97.5 percent in 1998. The 5 percent market share assumed for companies that did not participate in the settlement rose to 8.6 percent last quarter, a statistic that may be used by the industry to justify lower payments to states. "The level of payments is going to be 85 to 87 percent of what they were originally forecasting," an industry analyst said.

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