Latest Tobacco Tax Evidence and Messages
You can access our latest tobacco tax briefing paper by clicking here. This paper contains up to date and relevant research including the supporting evidence for increased and sustained tobacco tax increases in New Zealand past 2016.
Raising the price of cigarettes
One of the most effective measures to decrease consumption of tobacco is to increase the price. One of the most effective tools to achieve this is to increase the excise tax rate on tobacco products.
The World Bank and the World Health Organization Framework Convention on Tobacco Control both prioritise price increases as a key measure to decrease tobacco use. The 2003-2008 New Zealand Ministry of Health tobacco control plan, “Clearing the Smoke” also prioritised tax increases as a means of reducing prevalence.
The situation in New Zealand
The tax increase on tobacco in New Zealand on 28 April 2010 was the first increase above CPI for a decade. This also saw a 24 per cent increase on the excise rate loose-leaf tobacco and 10 per cent for factory made cigarettes. This resulted in the price of roll-your-own tobacco being more closely aligned to the price of factory-made cigarettes. The tobacco excise tax rose again by a further 10 percent on 1 January 2011 and 1 January 2012.
The tobacco companies are responsible for passing these costs onto their customers. It is likely that they will force their customers to foot the extra tax bill by raising the cost of their products. For example a 25 pack will increase from $13.30 to $17 by 2020. A 30g pouch of loose leaf tobacco that costs $21 will increase to around $30 by 2012.
Details of the price increase may be found on the Ministry of Health website.
Factory made (FM) vs Roll Your Own (RYO) cigarettes in New Zealand
A key issue for New Zealand is the way in which tobacco is taxed. The current system is based on weight per kilo of tobacco. This creates a discrepancy between how much it cost to smoke 20 factory made cigarettes and roll your owns. On average a RYO cigarette in New Zealand contains around 0.5 grams of tobacco. A factory made contains around 0.7 grams. Therefore by switching to RYO, a smoker can around 20 to 30 percent more cigarettes for their money than if they smoked factory mades.
The impact of this discrepancy is that New Zealand smokers have switched large numbers to smoking RYOs. Around 50 percent of smokers use RYO, one of the highest proportions in the world.
The excise tax increase of 24 percent on RYO tobacco and 10 percent on FM tobacco will go someway to addressing this price inequality.
Tobacco tax increases of at least 20 percent on an annual basis. A larger proportion of tobacco tax income is ring fenced to help tobacco control efforts and smokers who wish to quit.
- World Bank and World Health Organization report: Tobacco Control at a Glance
- World Health Organization Framework Convention on Tobacco Control. A global treaty to tackle tobacco
An in-depth report into tobacco tax and the costs of tobacco to the economy. Written by Des O’Dea of the Wellington School of Medicine.
Report by George Thompson of the Wellington School of Medicine into tying tobacco taxes into public health measures to tackle smoking
Key evidence and research supporting increased and sustained tobacco tax increases past 2016.