Tax hike but why no display ban?

Written By: - Date published: 10:10 am, April 29th, 2010 - 48 comments
Categories: health, tax - Tags:

I’m not against rising the excise on tobacco but everyone knows that if this government was serious about reducing the harm from tobacco this isn’t the best way to go about it.

Addicts have what an economist would call ‘inelastic’ demand for tobacco, it doesn’t go down much with price. A 10% increase in price causes just a 4% decrease in consumption according to one study. So bumping up the price 30% might decrease use by 12% but it does that by taking a whole lot more money out of the, mostly poor, tobacco using population.

It would be better to use proven methods of decreasing use that don’t involve taking more money off the poor. One is banning cigarette displays. It is well known that these displays have a strong effect in encouraging young people to start smoking and that the best way to reduce tobacco harm is for people not to start smoking in the first place.

But banning these displays is something that National, for its weird ideological reasons, won’t consider. Associate Health Minister with responsibility for tobacco harm reduction, Tariana Turia, once considered getting rid of the displays a priority. But she’s too busy reprinting her business cards with ‘Minister for Whanau Ora (don’t ask what it is)’ to worry about stuff like Maori dying of lung cancer any more.

I also don’t get why National had to take Parliament into Urgency (in fact, Extraordinary Urgency) once again.

If they had their act together, they could have easily passed the tax increase in a single day without the cost of going into Urgency. It looks like this was another product of National’s haphazard, last minute decision-making and poor House management (remember the other day when they wasted half an hour of their law-passing time on a debate on Steven Joyce’s academic record?).

So, yeah, sure out up the excise, but why not do more effective things that don’t hurt the poor? And why can’t National get its act together in the House?

48 comments on “Tax hike but why no display ban?”

  1. Tigger 1

    National MPs have certainly seen the light here. Back in 2003 they were defending smoker’s rights to the hilt!
    http://www.parliament.nz/en-NZ/PB/Debates/Debates/1/0/1/47HansD_20031015_00001320-Smoke-free-Environments-Amendment-Bill-Referral.htm

    Simon Power even quoted this on behalf of one smoker – “I work 60 to 70 hours a week on farms as a labourer, a shearer, a docker, a manager, etc. When I have finished my work at the day’s end and I want to go and have a beer and a cigarette at the ‘Chelty’, no politically correct member of Parliament from Rotorua is going to tell me whether or not I can stand in my local tavern and have a cigarette, after a long week’s work.’

    • Ianmac 1.1

      Well done Tigger. As Jim Anderton said in Parliament yesterday in regard to rise in tax for tobacco but not for alcohol, ” I can’t use the word beginning with H… but I can say Double Standards!” (Perhaps its National Double Standards?)

  2. Pascal's bookie 2

    One point. Say smoking rates drop by half. How big is the hole in the revenue from lost excise taxes?

    I think there is a problem with the taxes going into the consolidated fund. Any substantial drop in collection needs to be made up somewhere else. That would account for certain government actions, and non actions.

  3. You are a disgrace marty g.

    Tariana pushed this through but don’t let the facts get in the way of your diatribe against the maori party and tariana personally –

    “But she’s too busy reprinting her business cards with ‘Minister for Whanau Ora (don’t ask what it is)’ to worry about stuff like Maori dying of lung cancer any more.”

    That line is actually sick and wrong and filled with hate and envy.

    • Bright Red 3.1

      and where is the ban on tobacco displays? that’s the disgrace.

      • marty mars 3.1.1

        be patient BR and celebrate the victories as they occur instead of always finding the negative – where the maori party and it’s members are concerned anyway

        labour voted for this increase didn’t they? – don’t be so mean spirited.

        • Bright Red 3.1.1.1

          “be patient”, jesus, you sound like a Key apologist making excuses for higher unemployment, lower wages, and higher crime.

          ‘just wait, just keep on waiting’. We’ll be waiting till the crack of doom before you are willing to admit that Maori are going backwards under National.

          Even then you’ll make excuses for the Maori Party being part of that government.

          Tell me, with crime up, more Maori in jail than ever, unemployment of Maori doubled, and wages falling you consider that National has delivered for Maori?

          • Tigger 3.1.1.1.1

            I don’t think this is a victory to be celebrated. It’s another damn flag – looks good but in the end it isn’t going to solve anything.

          • marty mars 3.1.1.1.2

            you’re a broken record and a b-side at that

            Can you not see any positives for maori from this? What about for other people who live in this country? It’s all bad? maybe it is in your mind but that is simply because labour didn’t do it – but they did vote for it BR – so what does that mean for your tight little worldview?

            • Bright Red 3.1.1.1.2.1

              marty. Are you honestly defending a government that has increased Maori unemployment, cut wages, and seen crime increase while locking up a record number of Maori?

              or do you prefer not to address that?

              • i prefer to address the issues that i want to address in the way that i want to address them rather than be told what I should do and how i should do it.

                I am not defending anything but I am saying that increasing this tax is positive for maori and everyone else, and i am saying it was good to see most parties vote for it, and i am saying that i hope we can do more including getting rid of display ads for tobacco.

                Are you honestly saying that you think the negative statistics that accure to maori across a wide range of measures is due to the gnat led government?

              • Bright Red

                I’m saying that these statistics have worsened under the National/Maori Government and you support that government.

                You don’t like National (you call them “gnats”) because you’re a sensible leftie and you know they are bad for Maori. Yet you seem determined to turn a blind eye to the fact that things are getting worse for Maori under a government that the Maori Party is part of.

            • The Voice of Reason 3.1.1.1.2.2

              This is not a success, Marty, it’s a whopping great fail. Putting the price up will have a temporary effect, as it has in the past, but then the addicts will simply adapt their budgets to cover the expense. And as a result, an even higher percentage of working class family budgets will go on tobacco.

              If Turia gave a stiuff about Maori, she would have worked to ban advertising as well, as part of the path toward banning tobacco altogether. The prime reason National support this change is because it’s no change at all and their supporters in the tobacco industry will not be negatively affected.

              Labour appear to have supported it because even a temporary drop in consumption is welcome, but they at least wanted to limit the peddling of fags in dairies and they did their best to convince Turia to put some guts into the legislation. But she was never going to rock the boat by advocating that obvious practical step.

              All in all, another pipe dream from the deluded right wing leadership of the Maori party.

              • Tigger

                Concur TVOR – most alarmingly I found myself agreeing with Roger Douglas on this vote. It’s just a boot into the poor as it stands. Could have been a great law. Instead it’s just some pretty ribbons to go along with a flag and a Declaration.

              • Armchair Critic

                “And as a result, an even higher percentage of working class family budgets will go on tobacco.”
                Only if you take it at face value. Actually a higher percentage of working class family budgets will go as tax, to the government. This looks like a tax grab, without even the decency of directing the extra tax to programs that reduce smoking, help people quit etc.

            • bahandhumbug 3.1.1.1.2.3

              Well done govt, well done Tariana, pish posh to all the naysayers.

              http://www.nzdoctor.co.nz/quit

  4. gobsmacked 4

    Marty’s comment about Turia and lung cancer is offensive and false.

    It’s so dispiriting when the Standard’s writers take a legitimate issue and then undermine the argument, by adding gratuitous insults. It happens too often on here, and it really doesn’t help the left’s cause.

    Seriously guys, get some judgement. The little voice that says: “Good idea? Bad idea? Let’s think for a moment …”

    It’s really not hard. Do you genuinely believe Turia doesn’t care about Maori (including her own family) dying? Honestly?

    Of course you don’t. So why say it?

    • Tigger 4.1

      The point about advertising/displays is valid though. I doubt very much whether this law will affect smoking to a significant degree. My dad died from lung cancer. No matter how high the price of cigarettes got, he would have found a way to smoke. Turia might think she’s riding a righteous white horse here but I too question whether she wants to solve a problem or merely score a run on the board.

  5. big bruv 5

    I mostly agree with what Marty has to say on this, however, the real concern is how Labour have missed the boat once again.

    The very people you guys pretend to represent are the ones who are going to be most disadvantaged by this tax increase.

    Now I know that Goff cannot be seen to be supporting smoking but the issue he should be attacking the gutless PM on is that this is nothing more than another tax hike, a tax hike from smile and wave Key who campaigned on “a series of ongoing tax cuts”.

    Of course if Goff really had balls he would also be attacking this for what it really is, namely, another sop to the Apartheid party and a way of funding the racist whanau ora programme.

  6. Bill 6

    Why not announce a date on which tobacco sales will cease and allow addicts to register on the premise that they will have their tobacco supplied by the government for free or cheaply for either the rest of their lives or until they quit?

    That wipes out smoking in a generation or so and doesn’t encourage a black market in the interim.

    • CnrJoe 6.1

      As long as its not Port Royal ffs Bill

    • Rex Widerstrom 6.2

      Nationalise the cigarette industry?!

      Not a bad idea. I’d still charge the smokers reasonable amounts though, but it’d go into a fenced-off fund which would cover (or at least partly cover) the ridiculously high cost of their end-of-life care and patches, gum, hypnosis (or whatever works) for those who want to quit.

      But it is time we stopped mincing about and made tobacco illegal for anyone who isn’t a user at present.

      • mcflock 6.2.1

        Well, as a tobacco user I’d like a credit for the pensions that I’m statistically not going to use.

        Indeed, if the govt actually encouraged smoking the superfund would not be needed. But then actually doing the math makes it look unfair to “other” a minority group with bullshit.

        • Rex Widerstrom 6.2.1.1

          Okay, but you have to guarantee to turn up your toes by a certain date, otherwise the Tobacco Users Eradication Sqaud will be round to… you know… help you meet you obligations 😀

          As for your second suggestion, if they’re going to encourage smoking so as to reduce the pressure on superannuation then as a lifelong non smoker I do indeed object. I will expect equal subsidisation of my life-shortening vices… though I bet I can use up my quota of Pinot Noir and loose women quicker than you can get through your state-subsidised rollies 😛

          • Strathen 6.2.1.1.1

            The previous tax take on ciggies was estimated at $1.125 billion. The cost per year if every smoker required hospitalisation for smoking related illnesses is approximately $250 million.

            There’s already a huge surplus, combine that with the majority of smokers not living past 70, there’s a massive economic benefit for NZ.

            This increase will take the tax take up to approx $1.45 billion. As it’s done in increments, it will have a minor effect on the smoking numbers. We will still have 20% of the adult population smoking.

            As armchair critic said above, it’s a tax grab. Approx it’ll pay for the $250 mill we borrow per week, for 1 week per year. Now all we need is another 51 of these types of tax grabs and we will no longer have to cut public service spending.

          • mcflock 6.2.1.1.2

            Not talking about not paying you in your old age.

            Just suggesting that if you cared about your burden on the state, you’d smoke and take your chances with the rest of us 🙂

      • Rich 6.2.2

        I think there are many gang members who would agree with you. Think of the profits from 1.5mln regular buyers of illegal tobacco.

  7. Ianmac 7

    I think that the last time the question of shops cigarette displays came up, the lobby group reckoned that it would hurt businesses especially the corner dairy. Wouldn’t that be an indication that removing adverts/displays would have an effect?

  8. The Voice of Reason 8

    I don’t suppose there is any link between busting those home grow shops and this tax increase is there? Are we heading to the point where baccy is more profitable for crims than dope?

    • big bruv 8.1

      Voice

      “Are we heading to the point where baccy is more profitable for crims than dope?”

      I suspect that we are, when I lived in the north east of Scotland it was common for each and every town to have its very own black market supplier, at that stage a packet of 20 cost around five pounds, what these guys did was hire a van, cross the channel (to Belgium usually) and load up with as much booze and fags as they could fit in the van.

      Obviously they kept a low profile and were not easy to find but once they trusted you they would sell you a carton of cigs per week for anywhere between 25 and 30 pounds, hardly any smokers that I know purchased them from a retail outlet.

      Some of them were previously cannabis dealers, however the more the UK govt increased the duty on cigs the more they looked into becoming black market suppliers of cigs, they worked out that the profit margins on cigs were almost the same as on cannabis and they have almost zero chance of ever going to prison if caught.

      • insider 8.1.1

        I don’t think we’ll get large scale illegal imports. Product is too bulky, it’s hard to access from overseas in quantity, has low relative value meaning the cost/benefit of imports is low compared to the risk of losses if consignments are intercepted, and it is competing against widely available legal supplies.

  9. Name 9

    Geoffrey Palmer commenting on his (the Law Commission’s) review of Alcohol laws said on Morning Report yesterday that of all its recommendations, hiking the price of alcohol would have the biggest effect on reducing consumption – and of course increasing the duty on alcohol was the first thing the Govt. rejected doing.

    I’ve no doubt the same would apply to tobacco – I don’t give a damn as I don’t smoke – and here the Govt. went into extreme urgency to wallop the price up to reduce consumption.

    No doubt there is fecund ground here for all kinds of conspiracy theorising. To me it’s just a Govt. that has no idea beyond taking the easiest course from moment to moment like piss down a wall.

    • Bright Red 9.1

      the tricky thing is that tobacco is addictive. That means that putting up the price doesn’t have such a big effect as it might on other things.

  10. mcflock 10

    National are back to their old tricks: back in the 1990s when they went into coalition with Winston he wanted free doctors for kids. ISTR the caost was $300M. Where oh where to get the funds? A tobacco tax hike that raised revenue $300M.

    It was only Labour/Alliance that brought in free addiction treatment. National just hiked the price up that addicts had to pay.

  11. Rex Widerstrom 11

    Meanwhile Australia has hiked the tax of cigarettes by 25 percent.

    The Australian government reckons that will cut tobacco consumption by six percent and the number of smokers by two or three percent.

    But they’re going further and introducing a law to “prohibit logos, brand imagery, colours, and promotional text other than brand and product names in standard colour, position, font style and size”.

    Meanwhile the tobacco companies have castigated the move as being *cough*… bad for health::

    “If the tobacco products are available in the same easy-to-copy plain packaging, it makes it much easier for counterfeiters to increase the volume of illicit trade in Australia,” she said.

    “That illicit product may not have the health warnings on it, it won’t be subject to ingredients reporting.”

    Well hell yes. Because all that’s in the cigarettes on sale now is pure tobacco, right?

    • Lanthanide 11.1

      I guess these tobacco companies have never seen the exceptionally high quality counterfeiting that goes on around the world, where you can only tell that a counterfeit gucci bag isn’t a gucci bag because the colour of the stitching is just slightly off.

      Yes, having plain packaging will make it easier for new entrants into the market, but the problem is not from small outfits that can only manage to mimic basic packaging, but the massive organisations that already copy the ‘complex’ packaging.

      Several months ago there was a chinese company shutdown for counterfeiting Cisco products I believe. They had several buildings, their own factory and 37 staff doing customer services for their products.

      • Rich 11.1.1

        Half the time the company contracted to manufacture for Cisco or whoever just makes an extra few thousand units and sells them on the grey market.

        That sort of thing is losing China a lot of business, though.

  12. insider 12

    Regarding urgency, this was an increase in excise tax. Excise is usually paid by the importer or manufacturer upon import or exit of the product from a bonded storage, it’s not directly levied on the consumer price.

    So the aim of urgency was probably not to prevent consumers stocking up, but to prevent the tobacco companies emptying their warehouses and potentially getting a windfall gain by putting up prices on large amounts of old stock. The price for the stuff already in shops should not be affected by the tax changes.

    • Bright Red 12.1

      If that’s the reason, The Nats have given a year’s warning for the next round and two year’s warning for the round after that.

      • insider 12.1.1

        Good question. Maybe it’s just a tradeoff issue that they can control the potential gain one time but it’s not worth bothering about over time. They often give warning on fuel and alcohol too. Logistics prevents too much gaming.

    • Rich 12.2

      Urgency (especially extraordinary, don’t even bother to debate it, urgency) should be reserved for genuine crises, like wars, natural disasters and economic crises where law must really be changed urgently.

      I have no desire for cheap fags, but the government could have proposed this measure any time in the last year and a half. They could have put it in the last Budget. That way it could have gone through democratic process in the usual way and still be in force today.

      Do the Maori Party realise that if Key wanted, he could pass a law in this way abolishing the Maori seats? Rodney would be right behind it, and that gives them a majority.

  13. The hike in tobacco excise is simply a revenue grab. There is nothing redeeming about it. It is unlikely to achieve its aim of significantly reducing smoking. Why does it suck?

    1. Excise is a regressive tax (impacts more heavily on the poor)

    2. Tobacco (read nicotine) for a majority of smokers is not a rational choice (the substitution effect therefore is not relevant, most smokers will adjust their budgets accordingly, leaving low income families with less disposable income.

    3. The government is taking advantage of drug addicts (when it should be helping them break their addiction – can you imagine a government legalising prescription metamphetamine for addicts and having a tax on it?)

    4. The government becomes further dependent on tobacco excise revenue (however, I do not suggest lowering cigarette excise. Simple annual increases to keep up with inflation should be sufficient.)

    5. Black-market tobacco is becoming increasingly common (feeding gang livelihoods)

    This from a life-long non-smoker.

  14. Quoth the Raven 14

    Great article on anti-smoking puritans and harm reduction

    At a time when governments were giving free syringes to heroin and free condoms to children, the ‘quit-or-die’ approach to tobacco raised ethical questions, and was only possible by an almost evangelical faith in the smokefree world to come. Total abstinence had previously been seen as a pipe-dream, but as the anti-smoking movement gathered pace in the 1970s, activists and governments came to believe it was possible within a generation. This was in-keeping with earlier reform movements, which invariably set their eyes on prohibition sooner or later. Just as the American temperance movement set out with a message of moderation and ended with complete prohibition, so the Anti-Cigarette League of the early 20th century went from a campaign that solely targeted ‘coffin nails’ to fighting cigars, pipes and chewing tobacco (which were the ‘less hazardous’ alternatives of its day). The Anti-Cigarette League’s absolutist slogan ‘A Smokeless America by 1925′ bears an uncanny resemblance to the Surgeon General’s equally ambitious of 1986: ‘A Smoke-Free America by 2000 AD’. Both serve as reminders that bringing about total abstinence is easier said than done.

    Four decades later, the ‘quit or die’ approach survives. Its political legacy can be seen in Britain’s ban on Skoal Bandits in the 1980s and Australia and Canada’s recent ban on e-cigarettes. It can be seen in Finland’s pledge to ban any safer tobacco product that might appear in the future. It can be seen in the ban on snus that is enforced in every EU country bar Sweden. Its impact on the health of populations, however, can only be seen by comparing Sweden’s significantly lower smoking rate and lung cancer rate to its EU neighbours.

    In summary, modern anti-smoking activists oppose tobacco harm reduction because, like earlier reformers, they tend to be idealists. Even those who set out as pragmatists are liable to becoming more zealous once they become emerged in a worthy cause. Few activist groups of any hue avoid ‘mission creep’ for long. For the anti-smoking movement, the allure of prohibition – the only logical conclusion to its cause – could not be long resisted. To the anti-tobacco campaigner, the appearance of new tobacco products, even if demonstrably safer, innately feels like a step backwards. Their prohibition, on the other hand, feels perfectly natural and, since most alternative nicotine devices are niche products with relatively few users, they can be nipped in the bud with minimal resistance.

    • NickS 14.1

      Interesting piece, thanks, and yeah, making safer tobacco products available to smokers really should be part of dealing with the health issues of smoking, especially when there’s clear advantage to do so.

      Also, I don’t really mind so much people smoking as long as I, and other non-smokers don’t have to breath it in, and as far as the health issues go, I’m okay with the public costs being added onto the price of tobacco products.

  15. SPC 15

    Oh simply end public sale – and have Pharmac buy the smokes off the suppliers and distribute them through chemists (in plain cartons) on a prescription tagged to a ration card. That ends advertising here.

    Only those (over 18) registered as addicts in 2010 ever being able to obtain and continue to use these ration cards.

    • NickS 15.1

      That would be a great one for National to put through, since it’s instant political suicide.

      • SPC 15.1.1

        Not if Labour supported it as they did the price increase – despite it being a regressive tax that falls on the poor (generally so).

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