Industry “thrilled” about health-tax on tobacco products, Minister Lee says

PHILIPSBURG – Minister Emil Lee (Public Health) is currently discussing options to protect local tobacco product distributors against parallel import by registering the labels of their products. At the same time, the minister wants to introduce a ‘health-tax’ on tobacco products to finance St. Maarten’s healthcare system.

“The industry is thrilled,” the minister said at Wednesday’s Council of Ministers press briefing. “This is a win-win situation. Our healthcare system receives more money, we protect the distribution channels, we make sure we get the revenue we need and the distributorships increase in value – even though they are going to pay more taxes – because they get a bigger share of the business.”

We’re not there yet, because these plans are in the discussion phase. Minister Lee raised some eyebrows because he arrived at the press briefing with a package of Marlboro cigarettes but it soon became clear that it was a prop to make a point about parallel imports.

The minister asked one of his staff members to go out and buy a package of cigarettes. “She went to seven different places and only found these,” the minister said.

Remarkably, the Marlboro’s are produced in Senegal, distributed in Nigeria and finally sold in St. Maarten. In Senegal, the price of a pack of Marlboro smokes is around $1,25; the price in St. Maarten (for another pack of Marlboro’s that arrived via a regular distributor) is $2.73. Do the math.

Minister Lee said that wholesalers on the island have a problem with parallel imports. “They have a contract with the manufacturer fore exclusive distribution on the island. But because we don’t have any customs or regulations, others can import those products from other locations. It is legal, but it undermines the distribution network that has been set up between the manufacturer and the distributor.”

Lee acknowledged that buying products that arrive through a distributor are subject to double taxes. The sale of the wholesaler to the retailer and the sale of the retailer to the consumer are both subject to turnover tax.

The current discussion is about registering the labels of products that arrive on the island via their official distributor. As Minister lee showed at the press conference, the packaging of the Marlboros from Senegal is different from the packaging of the cigarettes that are sold via the distributor. The Senegalese package reads: “The Federal Ministry of Health warns that smokers die young.”

The regular package we bought at Carrefour reads: “Smoking Kills / Roken is dodelijk.”

Minister Lee’s idea is to allow only the sale of Marlboro’s that carry the label we found at Carrefour. “We’re saying: register that label. It will then be the only product that is allowed to be sold here. If products don’t have the proper label it means that they did not come through the proper distribution channel. They would be confiscated because the appropriate amounts of taxes were not paid for them.”

The minister later added that he would have to look at legal aspects and at enforcement issues. A sticker marking products from the official distributor is quickly counterfeited and furthermore, parallel imports are supposed to be good for competition. “we have an open market,” the minister noted.

Lee’s initiative ties in with attempts to find proper funding for the country’s national healthcare system. “Prior to Irma we had discussions about introducing a tax on alcohol, tobacco and sugary drinks to finance the National Health Insurance. The thinking is that over-consumption of these products is unhealthy and that it costs the healthcare system more money.”

Coming from the private sector, the minister wants to find reasonable solutions. “We understand that St. Maarten is a duty free destination; we want to make sure that we maintain a competitive position in the market place. So whatever we do, will be done in consultation with the industry and with stakeholders in the community.”

Lee recently met with representatives of Philip Morris and with local wholesalers. “I found that meeting to be extremely educational,” he said. The wholesalers are supportive of the idea of generating more revenue from the sale of alcohol and tobacco. For the moment, the focus is on tobacco.”

With the Senegalese Marlboro’s at hand, Lee pointed out that cigarette manufacturers produce different products for different markets. “Being a non-smoker, I always thought that Marlboro’s were Marlboro’s, but there are apparently different blends for different markets. The mix of ingredients is different. Though they are in the same red and white box, the product differs per market.”

Lee says that this has implications for tourism. “We have tourists coming to St. Maarten buying duty free products. They believe they get the same product for a lower price, but you can taste the difference. There is also a health a safety aspect to this.”

Top photo caption: Minister Lee shows a package of Marlboro: made in Senegal, distributed in Nigeria, sold in St. Maarten. Price in Senegal: around $1.25. Photo Hilbert Haar.

Mid photo caption: The Marlboro’s Minister Lee showed were made in Senegal. Photo Hilbert Haar.

Last photo caption: Marlboros bought at the Carrefour supermarket on Bush Road. Price: $2.73. Photo Hilbert Haar.