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by Ben Youdan, Director ASH
 Increasing tobacco tax is one of the most effective interventions to reduce tobacco use. Prime Minister John Key has indicated that in March the Cabinet will be discussing a tax increase, and the equalisation of tax on loose leaf and factory made cigarette tobacco. The tobacco control community must increase the pressure for a large tobacco tax increase and sustained annual increases.
Advocate for 20 percent increase in pack price. The rationale for this is as follows.
- Five percent is not enough. It would have very limited, and even negligible impact. Last year tobacco prices increased 5 percent with the CPI index. We need to go well beyond this.
- Economic projections suggest a 20 percent increase could result in annual decreases in smoking of around 2 percent. A large increase has the potential to reduce smoking rates more than any other intervention in recent years. For further discussion on this by Des O Dea see
www.sfc.org.nz/taxreports.php.
- In 2009 the tobacco industry dropped prices by up to a dollar on budget brands. This represented 9-10 percent decrease in price. Calling for an increase of less than this does not even bring prices back to their 2008 level.
- If we call for increases that are too small, the tobacco industry can easily absorb them by reducing their margins. Even if prices increased by 20 percent, in reality the cost to customers probably would not, as the industry would reduce its margins.
What you can do
Write to John Key supporting his views:
- On 1 February John Key stated that increasing tax reduces tobacco use. He was non-committal about taking action. He has been engaged in the issue. Send him an email (j.key@ministers.govt.nz) congratulating him on recognising the evidence, and urging him to support tax equalisation and a 20 percent increase.
- Write to Minister of Finance Bill English and other Cabinet Ministers.
Tax is due to be discussed in Cabinet. Some of you will live in the Cabinet Ministers' constituencies. Use this as an excuse to go visit them about the issue. Make it relevant to their constituency. Otherwise, write to Cabinet Ministers to canvass their view, outline the evidence and urge them to support tax equalisation and a tax increase.
Cabinet Members' contact details
Take smoking stats!
Watch: ASH Director Ben Youdan talking to Neil Waka on TVNZ News.
Key discussion points on tax
Evidence:
- The World Health Organization and the World Bank recognise that increasing tax is proven to be the single most effective intervention to reduce cigarette consumption.
- There has not been a significant tax increase in New Zealand for a decade. In this time smoking prevalence reduced by only 0.2 percent per annum. Tobacco industry annual returns show that consumption is at its highest for five years.
- Tax increases prior to 2000 had immediate and measurable impact on reducing smoking. The May 2000 price increase of 20 percent resulted in a 16 percent reduction in volume sales.
New Zealand specific points:
- The New Zealand tobacco market is dominated by budget smoking. The most popular brands (Holiday, Horizon, Pall Mall) are the cheapest. The tobacco industry describes New Zealand as a 'low value' market. In addition we have the highest proportion of roll-your-own smoking in the world. This is almost exclusively because it is cheaper. Cost is a major factor in New Zealanders' smoking, and this indicates that a tax increase is likely to be very effective.
- The high rate of roll-your-own smoking is down to price. Smokers roll them with less tobacco in than factory made cigarettes and get more smokes for their money. Any tax increase must be accompanied by equalising the way loose leaf and factory made tobacco are taxed so that there is no financial incentive to swap rather than quit.
- New Zealand has world class quit services that will support and subsidise quitters with NRT and advice.
Countering concerns about equity:
- There are concerns that a tax increase will hit low income, and in particular Māori and Pacific smokers hardest. These are important and valid concerns.
- Those who spend the greater proportion of their income on tobacco will be most responsive to reducing consumption after a price increase.
- Quit resources should be weighted towards these communities.
- The short-term financial hardship is far outweighed by the long-term health gain. Half of smokers die from tobacco use, many in middle age. Combined with debilitating illness, these people lose the ability to earn and this has far greater economic impact. Based on a 20 percent increase the additional cost to non-quitters would be around $200m per annum. The economic value of the health gains from people quitting and not dying is $3bn.
Other:
- At a time when revenue is required, increasing tobacco tax is a low risk way of increasing tax income.
Further information and evidence:
Media:
Local smoking stats:
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