'Final' 10% tax hike on tobacco hangs in the air

Tuesday, 4 June 2019

The Budget may have come and gone, but uncertainty still hangs over whether the Government will hike taxes on tobacco by another 10 per cent in January, Budget documents suggest.  

Taxes on tobacco have increased automatically by 10 per cent plus the rate of inflation every year since 2010, with the last of those planned tax increases due to take effect from the start of next year.

The next tax rise would push the average cost of a packet of 25 smokes above $40.

Budget documents said the tax rise had been factored into the Government's fiscal forecasts and would be expected to raise $295 million over the next four years.

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But they said the Government was still considering whether the rise should go ahead. 

Customs Minister Kris Faafoi has been contacted for comment.

The Tax Working Group recommended in February that if the January rise did go ahead, the Government should consider whether it should be the last.

'The group's preference is that, once the current schedule of tobacco excise increases end, the Government prioritise other measures to help people stop smoking before it considers further large increases in tobacco excises,' the working group said in its final report. 

It also noted that one submitter had suggested that tobacco tax rises should take place on July 1, rather than January 1, as there were no services open to help people quit smoking on the New Year public holiday.

According to Health Promotion Agency Smokefree, about 13 per cent of adult New Zealanders smoke on a daily basis, down from 25 per cent in 1997.

Statistics NZ said the average cost of packet of 25 cigarettes in March was $37.48, up from $34.57 in December before the last tax rise took effect.