'Black market' warning over $100 smokes

A leading academic says an extreme increase in the price of cigarettes could lead to black market dealing.

Speaking in response to a Ministry of Health discussion to raising the cost of a packet of cigarettes to $100 over the next eight years, Otago University health economics lecturer Des O'Dea said: "We all remember the days of prohibition in the United States and what that did to foster organised crime."

"While I don't think it would be anywhere near the scale of that, we could well see raids on retailers and a black market develop for cigarettes," he said.

In an internal working paper, the ministry has suggested that raising the cost of cigarettes to $100 a pack would significantly help achieve the Government's goal of a smoke free New Zealand by 2025.

The idea was floated that the Government hike the price of cigarettes to $60 next year and then 10 per cent every year thereafter, making the cost of a pack $100 by 2020.

O'Dea said increases in tobacco tax had already been substantial but good statistics relating to the effect this had on the numbers of smokers were hard to come by.

"And that's largely because of the commercial sensitivity the tobacco companies use not to release their figures."

He said, however, it was good the Government was doing something to bring down smoking rates.

While tax hikes on tobacco were already hurting some lower socio-economic families, O'Dea said that was unfortunately the point.

"They're designed to be painful and Maori representatives are well involved in all discussions that happen and are well aware of that, but it is believed the health benefits to all outweigh that."

The discussion paper said: "if we are to continue to lower smoking prevalence we need to both increase the numbers who successfully quit smoking, and reduce smoking initiation among young people".

The ministry said the most effective way to do this was through raising the price of a packet of cigarettes.

"The smoke free 2025 goal is unattainable by stopping smoking initiation alone and requires significant increases in cessation rates among current smokers.

"Some significant step-change measures are probably required early on - for example a very large increased in tobacco excise tax - to achieve the change in trajectory required."

The New Zealand Institute of Economic Research (NZIER) provided figures to the Health Ministry that the goal was achievable, but would require "ambitious" mid-term targets.

The ministry said almost all smokers picked up the habit between the ages of 14-24 and smoking rates peaked at age 20-30. It was estimated about 650,000 New Zealanders were smokers.

The document said a test simulation from NZIER showed a one-off taxation increase of 60 per cent would halve the numbers of those who picked up smoking in a year.

A 30 per cent increase each year after that, combined with extensive media coverage of the smoke free goal and health programmes to enforce quitting, would reduce smoking prevalence to about 5 per cent by 2025.

The NZIER recommended that for the 2025 goal to be achieved, smoking prevalence would have to be reduced to between 10 and 13 per cent by 2018. That required Maori prevalence to drop from about 44 per cent today, to 25 per cent in 2018.

"Tobacco taxation is the single most effective intervention available to drive down smoking prevalence figures," the briefing paper said.

Tax on tobacco has been hiked incrementally since 2010. Ministry figures showed since then, sales in roll-your-own tobacco had dropped by 14.7 per cent and manufactured cigarettes by 6.2 per cent.

The document said the NZIER had modelled a further tax hike to "kick start" the momentum toward the 2025 goal where, combined with a large "shock increase" in 2013, the price would rise 10 per cent every year after that.

It said that would be a more "realistic approach" than increasing the price of cigarettes by 30 per cent every year until the goal was achieved.

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