Editorial: Ramp up the excise tax

OPINION: Smokers are a determined bunch.

They've been demonised, discriminated against, and stigmatised. If this wasn't bad enough the habit they love is likely to kill 5000 of them this year. Despite all of this, one in five New Zealand adults 619,900 people still smoke.

The cards in the smoking business have long been stacked in favour of the health authorities, thanks to the determination of successive Governments to crack down on a huge burden on the health system. But the tobacco barons are fighting back. While the law prohibits tobacco companies from offering specials or discounts, the tobacco marketers have found a cunning way around the rules in order to peddle their product to more users.

Discounting may be out but there is nothing in the legislation to stop the companies cutting their prices permanently. British American Tobacco and Imperial Tobacco, who sell 91 per cent of the tobacco in the market, are involved in a price war and have cut prices on their cheapest brands by up to 90 cents.

Health lobbyists are aghast. They want prices to rise because increases, especially in tough times, are an incentive to get people to quit.

The anti-smoking lobby wants the Government to legislate to make it illegal to reduce the price of tobacco, so the product is committed to an inexorable price spiral. This is likely to become a legal minefield because of the way it interferes in the market. It amounts to price fixing. There is a much easier way and it is well within the Government's gift to tackle. Ask any group of smokers what would make them quit and the majority will say price. If price is the issue then the solution is to ramp up excise duty on tobacco to levels that really hurt.

Australia is leading the way with a plan to increase the price of 30 cigarettes to more than A$20 a packet. New Zealand should do the same. In addition the Government should address an anomaly in the pricing of loose or roll-your-own tobacco. This is gaining in popularity because it is substantially cheaper than ready-rolled cigarettes, but excise on the product has not been increased for more than a decade.

It should be increased to take the price of a 20g packet above the $40 mark. That way the tobacco companies can cut prices all they like, but they can't beat the impact of the excise rises. Hopefully it will accelerate the price war to the point where the margins of the tobacco companies are so hopeless they give up on the New Zealand market. Detractors will say smoking is all about choice, increases take away their rights, and the increases in excise will only encourage smuggling.

Smokers will still have choice. They will just have to pay more to exercise their right to poison their bodies. Smuggling is always likely to be a problem, but the extra cash from excise can be recycled to customs to crack down on it.

- © Fairfax NZ News