Cutting excise tax is not going to solve illicit tobacco
Saturday, 20 June 2026
Professor Janet Hoek is a public health professor at the University of Otago, Wellington, and co-director of ASPIRE Aotearoa, a research centre focused on equitably reducing nicotine use. She is a member of Health Coalition Aotearoa’s expert advisory group on smoking.
OPINION: In arguably her most explicit reference yet to tobacco industry spin, Associate Health Minister Casey Costello has blamed the tobacco excise tax for contributing to rising seizures of illegal cigarettes at the border.
Costello told Newstalk ZB that one reason 8.3 million smuggled cigarettes were seized by Customs in the first four months of this year was: “We’ve had an issue with the excise increases breaching that [sic] threshold. We’re at the point where there’s this big price differential.”
These comments are straight out of the tobacco industry’s playbook. Let’s examine why they lack logic and evidence.
First, tobacco taxes save lives. More expensive cigarettes encourage people to quit, deter relapse among people who have quit and discourage young people from taking up smoking.
Lowering excise taxes will not eliminate illicit markets, which develop and thrive when there is weak enforcement, established criminal networks, and high profits to be made.
Even if legal cigarettes were to become cheaper, illicit suppliers could respond by lowering the prices they charge thanks to the already inexpensive cost of production.
Australian researchers have estimated that lowering excise taxes on tobacco would embroil governments in price wars they could never hope to win.
Lowering excise tax would create a classic double jeopardy. On one side, it would disincentivise quitting through making smoking uptake cheaper. On the other, it would decrease government revenue, needed to fund the enormous health costs of diseases caused by smoking.
Costello has also promoted legalising additional nicotine products, such as oral nicotine pouches, not currently able to be sold in Aotearoa.
Although tobacco companies have pushed the government to introduce more diverse nicotine products to the market, the Ministry of Health and an expert group convened to advise Costello on policy, both strongly opposed this approach, unless these products could be proven to be effective and safe.
So, if lowering excise taxes and introducing unproven new products is not the answer, what approach should we be taking?
We need to reduce smoking prevalence as quickly as possible: the fewer people who smoke, the less profitable it becomes to source and supply illegal tobacco.
Under Costello’s watch, declines in smoking prevalence have stagnated. While that’s good news for tobacco companies, it has a chilling human toll. Thousands of people will continue to die prematurely from diseases caused by smoking.
Smoking will kill two out of three people who smoke long-term. Yet we continue to allow tobacco to be sold as an ordinary consumer product. That approach needs to change.
Solutions to both legal and illegal tobacco sales
First, we need to introduce a comprehensive licensing scheme, not just of retailers, but of every party involved in the tobacco supply chain.
A more integrated monitoring and enforcement system would enable better surveillance and quicker action when illicit tobacco is detected at any point.
Second, we need to revisit measures that would greatly reduce the addictiveness of tobacco. A large majority of people who smoke want to quit but can’t because they find smoking so addictive. That’s why many of them support a measure to reduce the nicotine content in cigarettes so they can, finally, quit. Moving people to alternative nicotine products doesn’t address what so many want: to become free of addiction and regain control over their lives.
In short, we need action to reduce the supply and consumption of illegal tobacco, but cutting the excise tax and introducing unproven new products is not the answer. Continuing – and strengthening – every effort already under way to reduce tobacco consumption is.