The multinational Philip Morris International (PMI) calls for a debate in Colombia on the need to set differential rules of the game -even taxation- for cigarette substitute devices.
(Lea: Our ultimate goal is for the cigarette to disappear: Philip Morris)
This, in connection with a recent decision made by the US food and drug authority, which can be taken as a reference. This is how it is stated by Carlos Guzmán, vice president of Corporate Affairs for the company’s Andean Cluster.
(Lea: Philip Morris, manufacturer of Marlboro, closes its plants in Colombia)
What is FDA approved about?
On July 7, the US Food and Drug Administration – FDA (for its acronym in English) authorized the marketing of IQOS as a modified risk tobacco product in the United States. This is a historic decision as it is the first time that the FDA has granted this authorization to an innovative electronic alternative to cigarettes, the result of more than 15 years of research, development and science by PMI. IQOS is the only heated tobacco product that has this authorization.
In practice, what does this imply?
Taking into account the above, the commercialization of IQOS in the United States can be carried out with the following information: this system heats the tobacco, but does not burn it and this significantly reduces the production of harmful and potentially harmful chemicals. Additionally, scientific studies have shown that completely switching from cigarettes to IQOS reduces the consumer’s body exposure to harmful or potentially harmful chemicals.
What does this mean for other countries and for Colombia, in particular?
From a legal point of view, it is binding on the United States, but naturally the decisions of North American authorities become a reference for the rest of the countries in the region and Colombia, of course.
The idea is that the governments and authorities of other countries are encouraged, at least, to give a technical and scientific debate that points to two things. First, that there is a differentiated regulation compared to conventional cigarettes as the FDA did, with institutional rules of the game. And since it is treated as a differential product, it should have a tax treatment, according to the nature of these products. Those are the big implications we expect from the FDA’s decision.
How is the market?
Today in the world of tobacco there are two large categories.
The first is the cigarette that we all know that is consumed by burning tobacco and inhaling the smoke.
And the other category is that of non-combustion products where tobacco is not burned and in that category there are two options: heated tobacco (ours) and electronic nicotine administration systems that are what we know as electronic cigarettes .
What standards apply to these products?
Today there are no rules of the game and there is no applicable regulation. We must have a suitable regulatory framework for this type of product. We are in favor of the company that there is an absolute and total prohibition of its use for minors, for pregnant women and for people with problems associated with diabetes, heart or blood pressure problems.
The company defined that these products are only for adult smokers. We are in favor of this regulation and the definition of different graphic warnings that are communicated to the user.
And of course, our postulate is that any discussion is made on scientific evidence. We must be clear that this is not a risk-free product.
What would be the ideal tax structure for that portfolio?
The good news is that this is already invented. What we are proposing is that, based on a tax structure that exists today, we set taxes on these products.
Do these products today pay the same taxes as conventional cigarettes?
The current tax framework does not include a tax structure for heated tobacco products, or electronic cigarettes. Since June 2018, Coltabaco made the decision to pay for its Heets product the consumption tax rate contemplated for cigarettes. The foregoing, because we consider that while a tax structure for these products is defined by the Government, acting in another way goes against our principles and is not sustainable over time.
Do you expect the taxes for this portfolio to be lower?
The State establishes said tax in order to increase its cost and thus discourage consumption. While the new alternatives are not safe, their consumables must be subject to this tax, but in a different way than cigarettes. The physical characteristics (volume and weight), techniques and the externalities generated are different from those of a cigarette.
Your tax treatment must consider such differentiation. Precisely in the same way, the FDA in the United States recognized the differentiation of these products from cigarettes. Without a doubt, we are in favor of these products paying the taxes that they must pay.
How has the migration to new options been?
In Colombia, we have around 80,000 IQOS users, compared to a nationwide smoking population ranging from 2 to 2.5 million people. The data depends on the source. In the world, there are 15.4 million IQOS users and of that total more than 70%, that is, 11 million, have completely stopped smoking and have made their complete transition to IQOS.