STAND. COM. REP. NO. 866-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2034
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No.
2034, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to provide a more effective
means to assess, collect, and enforce the Cigarette Tax and
Tobacco Tax Law by, among other things:

     (1)  Stipulating that the excise tax on cigarettes be
          imposed and collected through the use of stamps
          purchased by licensees and affixed to cigarette
          packages;

     (2)  Requiring licensees to file a monthly report of the
          licensee's distributions of cigarettes and purchases of
          stamps during the preceding month to the Department of
          Taxation (DOTAX);

     (3)  Establishing provisions for civil and criminal
          penalties for violating the cigarette stamp tax system,
          forfeitures of unlawful cigarettes, and the seizure and
          confiscation of unstamped cigarettes;

     (4)  Appropriating funds to DOTAX for start-up costs to
          implement the cigarette stamp tax system; and


 
 
 
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     (5)  Appropriating funds to the Attorney General for the
          hiring of necessary staff for the enforcement of the
          cigarette stamp tax system.

     In addition, this bill requires:

     (1)  The Director of Taxation to submit findings and
          recommendations to the Legislature prior to the Regular
          Session of 2006 as to the effectiveness of the bill in
          reducing the loss of cigarette tax revenue to the State
          from illegal sales of untaxed cigarettes; and

     (2)  The Attorney General to report to the Legislature prior
          to the convening of the Regular Sessions of 2002 and
          2003 on its activities relating to the enforcement of
          the cigarette stamp tax system.

     DOTAX, the Department of Health, and the Legislative
Information Services of Hawaii testified in support of this
measure.  The Attorney General also testified in support of this
measure but with suggested amendments.  The Coalition for a
Tobacco Free Hawaii testified in support of the intent of the
measure.  The Tax Foundation of Hawaii submitted comments on this
measure.

     Your Committee has amended this bill by:

     (1)  Deleting references to chapter 281, Hawaii Revised
          Statutes, the Intoxicating Liquor Law;

     (2)  Deleting the appropriation amounts for the purpose of
          continued discussion;

     (3)  Including amendments suggested by the Department of the
          Attorney General to strengthen the enforcement
          provisions of this measure; and

     (4)  Making technical, nonsubstantive amendments for
          clarity, consistency, and style.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2034, H.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as H.B. No. 2034, H.D.
2.


 
 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair