Blog: Tobacco Tax Increases by 10%

In the 2016 budget, the government increased the tobacco tax by 10%, rejecting the Ministry of Health’s proposal for a 12.5% increase in tobacco tax. The Ministry wanted an immediate Budget night increase followed by a further four annual increases of 12.5% from January next year. However, the government rejected both these proposals and opted for a 10% increase despite being advised that it wasn’t sufficient to achieve their smoke-free goal.

 

Aside from the associated tax revenue that will come from a tobacco tax, it is hoped that it will reduce smoking as a whole. The tax spike was presented as being part of National’s vision to make New Zealand smoke-free by 2025. The World Health Organisation, World Bank and the New Zealand Ministry of Health along with other researchers all believe increasing the price of cigarettes is one of the most effective tools to decrease consumption.

The way the current system operates means the tax is added on to the product:

 

New Zealand First leader Winston Peters said tobacco tax hikes would disproportionately affect poor families. He argues that the price increase will push working families to cut down on other goods rather than decrease smoking.

Health campaigners believe 10% is too small and recommended 20% as being more appropriate. The Heart foundation believes it would be more effective if it was bigger because the industry has been able to adapt to the 10% increases.

To be effective, tax increase needs to be accompanied by increased health promotion and targeted ‘stop smoking’ services. The Government spends about $60 million a year on quit smoking programmes and reaps in $1.5 billion a year in tobacco taxes. Some argue that approving e-cigarettes for smoking cessation would be a more effective way of helping people quit smoking.

What do you think?

Is a 10% increase enough? Is a higher tax too much?

Share with your friends, and get discussing!

Sources:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11645449
http://www.ash.org.nz/our-current-campaigns/tobacco-tax/
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=11674679
http://www.tradingeconomics.com/new-zealand/consumer-price-index-cpi

 

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