Tobacco tax to rise again

Is rising tobacco tax fair?

Helping to quit is not the only cost of tobacco use though – health costs are high, as are related issues of poverty.

The details from Stuff:

From January 1, 2018 the tobacco tax is 83 cents per cigarette, with GST levied on top of that. A smoker who smokes 20 cigarettes per day is paying $133 in tobacco tax each week, including GST.

How much tax is being collected?

The Government collects $1.7b per year in tobacco tax itself, and $1.9b when the GST on the tobacco tax is included. According to Treasury, this amount is forecast to grow to $2.2b by 2021.

Only $62m, or 3 per cent of this money, is spent encouraging or actively helping smokers to quit.

But increasing tax has encouraged many people to quit.

Tobacco tax has played a part in reducing the proportion of adults (aged 15+) who smoke from 20.1 per cent to 15.7 per cent over the last 10 years.

However 600,000 people still smoke.

A pack a day smoker earning $45,000 a year would pay 15 per cent of their income, or close to $7000 per year in income tax and a further 15 per cent (nearly $7000) of their income in tobacco tax each year.

Given that poor people are more likely to smoke that must have a huge impact on their quality of life – and the quality of life of their families.

The tax is being paid by those for whom the policy is failing. Māori, Pasifika and those on low incomes are over-represented in this group.

Of course reducing smoking is a very important health goal, but addicted smokers are surviving on significantly less money per week after paying the tobacco tax. A pack-a-day smoker has $133 per week less to spend on heating, good food and clothes for children.

There are other adverse effects of rising tobacco prices – dairy robberies are increasing and often involve violence. Other crime to finance tobacco purchases is another.

The author of the Stuff opinion piece is Kathy Spencer, a (non-smoking) former Deputy Director-General in the Ministry of Health (responsible for Sector Policy) and a former Manager of Personal and Indirect Tax in the Treasury. She suggests:

Smokers need more active help to quit and there are now many ways to do this: more active support from health professionals, programmes like Quitline, nicotine replacement, e-cigarettes and so on.

The new government has the opportunity to introduce a fairer approach:

  • Double the amount spent on actively supporting smokers to quit, especially Māori, Pasifika and low-income groups.
  • Freeze the excise rate at the current level.

Success will mean that the Government will lose the $2b in revenue that it has been getting from addicted smokers.

It’s time to start thinking about collecting this revenue in other ways, from people who are in a better position to contribute.

I don’t think that increasing taxes of non-smokers to finance attempts to get smokers to quit would be very popular.