Suggestion 1: Integrate industry consultations into the process of deliberating new regulations or legislation.

Throughout the amendment process of control policies, the tobacco industry has repeatedly raised concerns that the proposed measures have failed to comprehensively take the tobacco market into consideration, cautioning that this may lead to a significant rise in illicit tobacco trade. We urge the government to address these concerns by gathering input from relevant parties before implementing regulatory changes to safeguard the rights and interests of consumers and legitimate businesses and ease future administrative difficulties.

Following the passage of the Tobacco Hazards Prevention Act on February 15, 2023, the implementation of certain provisions of the law has been ineffective and lacking in transparency. One example is Article 7, which covers health risk assessment reviews for designated tobacco products. Although the law was promulgated on March 22, 2023, the detailed review standards and processes have still not been clearly defined.

As another example, on March 20, 2023, a draft regulation “prohibiting the use of floral, fruity, chocolate, and mint flavors in tobacco products” was made available for public consultation for only seven days, severely limiting stakeholders’ ability to fully engage and contribute to more effective and comprehensive policy development. Moreover, the government has only released minimal information regarding this issue. To date, the Ministry of Health and Welfare (MOHW) has merely indicated that the proposal is still under internal review.

The tobacco industry has actively participated in the legislative amendment process by submitting public comments. Yet, as mentioned above, following promulgation of the regulations governing the health risk assessment review, detailed standards and processes for designated tobacco products review remain undisclosed, with information occasionally surfacing only through media reports. Such lack of transparency goes against the principle of good regulatory practices that stakeholders expect the government to follow.

In addition, the MOHW’s broad discretion over the ban on tobacco product additives, with its ill-defined terms and scope, has significantly burdened businesses. The resulting unpredictability of regulatory actions has impaired business operations and planning, causing significant financial losses.

To safeguard the public’s right to information, the MOHW should fully disclose its procedures and decision-making processes. By committing to transparency and openness, the MOHW can address concerns of information asymmetry between the government and the public, thus avoiding allegations of conducting “black box operations.”

Revisions to tobacco control policies inevitably have a serious impact on industry, making it necessary for businesses to be given sufficient time to adjust related product lines and supply chains. The tobacco industry therefore recommends that as part of the process of drafting any new legislation, the MOHW meet with industry representatives to achieve broad consensus on such critical aspects as prohibited items, implementation dates, and the handling of existing stock. Discussions should include consideration of a grace period before implementation takes effect, as is the practice in the European Union and other regions, to mitigate potential adverse effects on industry.

Suggestion 2: Implement effective measures to combat the illicit cigarette trade.

On February 24, 2024, the National Treasury Administration under the Ministry of Finance (MOF) released the 2023 results of its anti-illicit trade of tobacco products operations. The combined efforts of central and local authorities resulted in the seizure of around 17.5 million packs of illegal tobacco products, an increase of nearly 12% compared with 2022. Notably, over 10.8 million packs, constituting about 62% of the total seized, were from domestic underground factories. This figure represents a substantial rise of nearly 245% from the 3.2 million packs in 2022, indicating that the pattern of illegal tobacco activities in Taiwan has shifted from small-scale importation and smuggling to large-scale domestic production by underground facilities using smuggled, substandard tobacco ingredients.

Tobacco taxes are a major source of revenue for the national treasury. Illicit tobacco products, unless effectively eliminated, will undoubtedly threaten the stability of tax revenue and the social welfare policies that depend on these funds. Illicit tobacco activities must be tackled through a balanced approach, mindful of avoiding the enforcement of excessively strict or unreasonable measures, such as banning additives in tobacco products.

In addition to the profitability for illicit traders, market demand significantly fuels the illicit tobacco trade. Domestic and international experiences indicate a close connection between the volume of illicit tobacco seizures and the strictness of tobacco control policies.

When tobacco control measures are severely tightened, consumers who find that their preferences are not accommodated for in the legal market may be driven to the illegal market. It is therefore vital to consider consumer behavior and market dynamics when formulating tobacco control policies to prevent an unintended boost in the illicit market.

Safeguarding the rights and interests of legitimate businesses should be a top priority for the government. The tobacco industry welcomes the MOF’s enhanced initiatives to combat illicit tobacco products. However, the government must also formulate rational and predictable tobacco control policies. An effective strategy to prevent the resurgence of illicit tobacco activities requires a dual approach combining stringent enforcement with a sensible regulatory framework.