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Government losing millions due to foreign cigarettes

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Wednesday, 27 November 2013 10:11am

The New Zealand Government is losing up to $89.1 million per annum in tax revenue due to tobacco brought in to the country from overseas, ASPIRE 2025 researchers estimate. The figure is based on new research published in the New Zealand Medical Journal from a study involving the collection of discarded cigarette packs.

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ASPIRE 2025 Co-Director Professor Richard Edwards commented that much of the lost revenue is likely due to duty-free imports, and as it doesn’t include cigarettes purchased duty free by arriving passengers at New Zealand airports, the figure is likely to a be a conservative estimate of lost revenue.

He noted that the availability of cheap duty free tobacco products undermines the impact of tax increases and the ability to achieve the Government’s goal of a smokefree New Zealand by 2025.

“Tobacco excise increases are highly effective at encouraging smokers to quit and discouraging children from starting to smoke. Duty-free tobacco imports undermine this by making cheap cigarettes available to smokers and to children who, as a result, may be more tempted to try smoking,” Professor Edwards says.

The researchers argue that New Zealand should follow the example of Singapore, which has recently abolished duty-free allowances, or Australia, where the allowance has been greatly reduced.

The researchers carried out discarded pack collection studies in 2008 and 2009, and again in 2012 and this year to assess the proportion of discarded packs that were foreign and estimated to have missed Government tax revenue. They estimated a loss of $89.1 million tobacco-related revenue per year for 2012. This compared to an estimated $38 million in the earlier study.

The researchers believe the increase in estimated lost revenue is partially due to several hikes in tobacco taxation since the first study as, with higher tax rates, every foreign pack represents a greater loss of potential revenue. However, the researchers also found a higher proportion of foreign packs in the second study, which they say could be the result of more New Zealand smokers purchasing cheaper cigarettes when travelling overseas because of the hike in New Zealand prices.

The evidence is clear that duty-free and smuggled tobacco are a public health problem, Professor Edwards says.

“Our concern is that by making cheap cigarettes accessible, duty free imports undermine the impact of high tobacco product taxes in encouraging and supporting smokers to quit and preventing children starting to smoke.

“Closing this loophole would save the government money that could then be spent on better health care for New Zealanders. It would also be an important step towards a Smokefree New Zealand, and help to safeguard the health of current and future generations of New Zealanders.”

For further information contact:

Professor Richard Edwards
Department of Public Health
University of Otago, Wellington
Tel 64 4 918 5089
Email richard.edwards@otago.ac.nz

www.aspire2025.org.nz

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