Despite recording a decline of 9.5 per cent in its profit before taxes revenue for 2017, the Demerara Tobacco Company (DEMTOCO) paid the Government over $1.1 billion in taxes, according to its financial statements presented at the company’s Annual General Meeting on Tuesday.
DEMTOCO’s Chairman, Marcus Steele, said 2017 was a challenging year for the company due to a number of factors inclusive of volatility in the foreign exchange market, which affected foreign currency transactions and the performance of the company. He said 2017 represents a fundamental change in the local regulatory landscape of the tobacco industry with the passage and promulgation of the Tobacco Control Act.
He noted that while the measures under the Tobacco Control Act will come into effect later in 2018, they have already began experiencing some market fluctuations.
“As a result of these key macro-economic and industry related realities, the company experienced a five per cent volume decline over 2016, with gross revenues also declining by four per cent when compared to the previous year. Profit before tax amounted to $2.5 billion, a decline of 9.5 per cent as compared to last year,” he said.
The Chairman said the management team is instituting measures aimed at effectively preparing the company for transition into the new regulatory environment. He further related that the global tobacco industry faces increased regulatory measures and while they are not opposed to the measures, they believe the regulations should be balanced and enforceable.
“These measures will certainly impact the way we have operated our business and so we take this opportunity to urge the Government to provide the requisite clarity and to exercise the comprehensive public education and raise awareness which is required to minimise dislocations and anxiety during the enforcement of the Act,” Steele said.
Steele said they were able to engage the authorities towards fully understanding the negative implications from “aggressive and unmitigated” taxation of the industry.
As it relates to the regulations to the tobacco industry, the company has been in constant contact with the Public Health Ministry. Steele related that it is very important to note that legislation implemented without consultations tend to be a disaster.
Meanwhile, Managing Director Maurlain Kirton said they have secured a tentative meeting with Public Health Minister Volda Lawrence, which will address some of the issues they have as it relates to the legislation.
“There are six key areas which concerns us, one of which is the ban on vending or in trays, the issue of the ban on 10s, the issue on the ban on sponsorship and promotion, the issue of the ban on corporate branding because the legislation extends itself beyond product branding but our corporate brand that has been around for 84 years is also threatened,” she said.
“We are at the stage where the minister has agreed to a meeting through a third party and we have supplied her with an agenda for that meeting and we are hopeful that meeting happens very soon in another two weeks, we are prepared to sit down and have an engagement,” Kirton added.
The Managing Director said the intention of that meeting is to ensure that the Demerara Tobacco Company continues to exist and adapt to the legislation but stressed the need for enforcement.
As of September 2018, the Guyana Revenue Authority will be introducing tax stamps on all alcohol and tobacco products. In response to this move, the Managing Director said there will be compliance with the legislation but noted there will be consequences.
She warned that if the regulations are not enforced then there will be an increase in illicit trade, revealing that it currently accounts to 25 per cent of the total consumption.
Kirton said if not properly enforced then it will be disastrous for both the companies and Government since they will both lose revenue.
Additionally, Chairman Steele said there is enough evidence in the Caribbean to support the sentiments expressed by Kirton, explaining in Jamaica, they have seen illicit trade rise from 10 to 30 per cent due to the implementation of regulations without consultation.
The Tobacco Control Act became law in August 2017 after passage by the National Assembly and subsequent assent by the President.