Electronic cigarettes international group signs memorandum of understanding with european tobacco leader tdr

Electronic cigarettes international group signs memorandum of understanding with european tobacco leader tdr

February 14th, 2015

Expands ECIG s distribution across seven countries in South East and Central Europe
Enhances TDR s leading portfolio offerings to customers with value enhancing products in a high growth segment

GRAND RAPIDS, MICHIGAN, December 10, 2014 Electronic Cigarettes International Group, Ltd. (OTCBB ECIG), today announced that it has signed a memorandum of understanding with TDR, the leading independent tobacco company in South East Europe, including a 60% market share in Croatia. The memorandum of understanding defines the terms for exclusive distribution of ECIG s brands across TDR s territories, with a definitive agreement and product launch expected in the first quarter of 2015.

TDR, part of Adris group, a holding company with annual revenue of $1 billion, is one of the largest tobacco companies in South East Europe. TDR markets its leading brands of Ronhill , Walter Wolf and York across Eastern, Central and Western Europe and the Middle East. TDR is a vertically integrated organization consisting of five companies including Hrvatski Duhani, the leading buyer, packer and dealer of Virginia and Burley tobacco in Croatia iNovine, a network of over 590 retail stores in Croatia and Bosnia and Herzegovina Istragrafika, the leading producer and exporter of commercial packaging in Croatia and Adista, TDR s tobacco distribution companies in Croatia and Bosnia and Herzegovina. TDR also operates branch offices in Croatia, Bosnia and Herzegovina, Germany, Kosovo, Macedonia, Montenegro, Serbia, and Slovenia. Each company has a distinct role in the TDR s value chain, from tobacco growing and processing to production, distribution and retail support for tobacco products.

Mato Zadro, Chief Executive Officer of TDR, said, We are very excited about our partnership with ECIG. We have the strongest tobacco business in the region, and partnering with the leader in the e cig category will enable us to accelerate growth and provide our customers the leading products in this new market segment. We are convinced that electronic cigarettes will be a very significant business, and believe that both companies will benefit greatly by leveraging our combined product and distribution strengths.

Brent Willis, Chairman and Chief Executive Officer of ECIG stated, TDR is a great strategic partner with an outstanding leadership team. We are extremely impressed by their tremendous success and experience in the tobacco industry throughout South East Europe and other markets. We are very excited about building the electronic cigarette business with them in a very attractive and high growth region.

About Electronic Cigarettes International Group, Ltd. (ECIG)

Electronic Cigarettes International Group, Ltd. (ECIG) is dedicated to providing a compelling alternative relative to traditional cigarettes for the more than 1 billion current smokers around the world. ECIG is a fast growing independent electronic cigarette company, and owns the trademarks VAPESTICK , FIN , Victory , GreenStix , VIP and others. The Company owns multiple subsidiary companies and has operations in North America, and Western Europe. ECIG offers consumers a full product portfolio that incorporates quality and the latest technology. The Company s website is

Safe Harbor Disclosure

This press release contains forward looking statements that are made pursuant to the safe harbor provisions, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements are any statement reflecting management’s current expectations regarding future results of operations, economic performance, financial condition and achievements of ECIG, including statements regarding ECIG s expectation to see continued growth. The forward looking statements are based on the assumption that operating performance and results will continue to materialize consistent with recent trends. Management believes these assumptions to be reasonable but there is no assurance that they will prove to be accurate. Forward looking statements, specifically those concerning future performance are subject to certain risks and uncertainties, and actual results may differ materially. These risks and uncertainties include ECIG s reliance on additional financing, ECIG s profitability and financial health, risks associated with ECIG s products, including that they may pose a health risk governmental regulations may impact ECIG s business the market or consumers may not accept ECIG s products ECIG relies on a single class of products existing or pending patents may affect ECIG s business and other factors disclosed in the Company’s filings with the Securities and Exchange Commission. Unless required by applicable law, ECIG undertakes no obligation to update or revise any forward looking statements.

For investor inquiries please call

Brandi E. Piacente

The Piacente Group, Inc.

Tel 212 481 2050 ext. 402

Email ecig

Tobacco taxation in the european union and united states

Cigarettes online Blog Archive European commission trying to ban electronic cigarettes again

Tobacco Taxation in the European Union and United States
Sijbren Cnossen
October 19, 2009

Tobacco tax systems differ across countries not only with regard to the overall tax level, but also the mix between specific and ad valorem taxes. What does economics have to say about how governments should tax tobacco?

Both the level and the structure of tobacco taxes differ markedly between, as well as within, the European Union and United States. (The focus here is on cigarettes alone, as they constitute over 90 percent of tobacco consumption.) Within EU member states, the total tax burden (excises and value added taxes, or VAT) is around three quarters of the retail price of cigarettes, or over 300 percent of the pre tax price. The southern member states favor predominantly ad valorem taxes (that is, percentage rates on the value of a pack of cigarettes) whereas in the northern member states, specific taxes constitute more than half of the total tobacco tax burden.

In the United States, tobacco taxes are almost wholly specific. The federal government levies a tax of 39 cents per pack (of 20 cigarettes), state governments levy taxes that average about 60 cents per pack, and the Master Tobacco Settlement Agreement, concluded in 1998 (under which tobacco companies are expected to pay $206 billion to settle product liability suits) effectively added a further 30 cents per pack. Nonetheless the total tax (excise and retail sales taxes), about $1.30 per pack, amounts to about 37 percent of the retail price, or about half the rate in the European Union.

What does economics have to say about the appropriate level, and structure, of tobacco taxation?

What Costs do Smokers Impose on Others?

The causal link to future health problems from smoking is extremely well documented smoking is a primary cause of lung cancer, emphysema, chronic bronchitis, and a major cause of heart disease and stroke. Smoking by pregnant women leads to low birth weight babies, neonatal death, and sudden infant death syndrome.

While the health consequences of smoking are important, in principle they are irrelevant to public policy unless the costs imposed are external (that is, imposed on others rather than borne privately by the smoker). The principle of consumer sovereignty implies that a rational person who weighs all the costs and benefits of his actions should be free to smoke as long as he does not impose costs on others and is fully informed about the consequences of his choices.

Virtually all empirical research suggests that the external costs of smoking are relatively small. The burden of medical payments on government due to smoking related illness is one potential source of external cost. However, this near term burden is at least partly offset in a lifecycle context, as the average smoker lives a shorter life, which saves on pensions and health care costs of age related disease. Bans on smoking in public places have greatly reduced the external costs of environmental or second hand tobacco smoke. However, little has been or can be done about the health problems experienced by children and nonsmoking partners within the family at home. Perhaps economists assume too easily that such costs are largely internalized by the smoker through altruism or negotiation among family members.

Sijbren Cnossen is Professor of Economics at the University of Maastricht and Emeritus Professor of Tax Law at Erasmus University, Rotterdam.

Information and Addiction Failures

If smokers, especially teenagers, are poorly informed about the costs of smoking, then to that extent, the costs of smoking are effectively external. However, if inadequate information is the problem, this is best addressed through warning labels and information dissemination programs about health hazards. In fact, evidence suggests that 90 percent of U.S. consumers are aware of the long term health effects of smoking.

Nonetheless, the fact that nicotine is addictive may undermine the consumer sovereignty argument against government intervention. If smokers behave myopically in choosing to consume an addictive drug, the rationality condition ceases to apply, because the addictive smoker is, to some extent, a different person than the one who decided to start smoking. Furthermore, consumers may excessively discount the longer term costs of addiction. Consequently, they may therefore have self control problems, referred to as internal costs, where they continually plan to smoke less in the future than they actually can. In this case, cigarette taxes may help to reinforce a commitment to quit in the future.

In fact, higher taxes seem to be most effective in reducing smoking prevalence among teenagers who are better able to kick the habit, because addiction has not yet taken hold. Evidence suggests that a 10 percent increase in cigarette prices is associated with about a 4 percent reduction in smoking among adults, but an 8 percent reduction among teenagers.

Evidence suggests that tobacco tax levels, even in the United States, are difficult to justify on externality grounds, let alone those levels prevailing in the European Union. High taxes may reflect a form of paternalism, such as a desire to discourage young people from taking up smoking. The internal cost argument for higher taxes has not yet been settled.

What s the right way to tax tobacco?

Tobacco is far from a homogeneous product. The United States and northern European countries tend to produce higher quality brands than southern European countries. Ad valorem taxes raise the prices of different brands in the same proportion and therefore they do not distort a consumer s choice between high and low quality brands. This makes economic sense, to the extent that the purpose of tobacco taxes is to raise revenue.

Taxing cigarettes according to their external costs leads to a very different conclusion, however. The damage caused by cigarette smoking is independent of the price at which it is sold, so that correction of externalities favors specific over ad valorem taxes. All else equal, the share of specific taxes in total tobacco taxation should be smaller when the importance of raising revenue is greater, and the case for correcting externalities, correspondingly smaller. To some extent, this reasoning is consistent with the high ad valorem tax element in EU tobacco tax systems and its absence in U.S. structures.

Some variation in specific taxes across different tobacco products may in fact be appropriate. Since health damages are correlated with the tar content of cigarettes, taxes on high tar cigarettes should be higher too. However, some research shows that addicts smoke low tar and low nicotine cigarettes differently, inhaling more to increase the amount of nicotine they ingest. So corrective taxes might not be proportional to tar content, but some differentiation is likely to still be appropriate. Moreover, a tar tax would give manufacturers an incentive to develop palatable low tar cigarettes, which would have long term health benefits.

A Complex Question

The question of what the right level and structure of tobacco tax should be is a complex one, given the multiple objectives of policymakers. The reasons for levying high taxes on tobacco products are the predictability of the revenue, the desire to discourage youths from taking up smoking, and the belief that smokers should pay for the burden they impose on others. The reasons for moderating the level of tobacco taxes are the principle of consumer sovereignty and the finding that the external costs of smoking may be low. And the choice between specific and ad valorem taxation depends on whether the primary goal of policy is to discourage smoking or raise revenue.