Today, the news is that One Nation wants to cut the tobacco excise by 75%. Tobacco excise is not a new topic – I wrote about it last year.
Essentially, the issue is one of tax and consumption.
Right now, the forecast for tobacco excise revenue is for it to fall to a level not seen this century:
Now that should be a good thing – it should mean fewer people are smoking.
The problem is, unless in 2021 we had a pretty astonishing drop-off in smoking rates, then something is amiss.
And it is.
As the ABS found in June through analysing wastewater, consumption of tobacco and nicotine has not fallen, but the consumption of legal tobacco has:
There is some debate over these figures – it may not mean that actual smoking rates have risen but that the level of nicotine in the cigarettes being smoked has increased.
So, what has happened? Well, over the past 15 years, there has been a very strong increase in the tobacco excise taking it from 26 cents a stick to $1.53.
That’s a 488% increase. Over the same period, overall inflation has risen around 54%. It has meant that tobacco prices have gone up well beyond other things:
It has meant a standard 25-pack of cigarettes has gone from around $12.95 in 2010 to now around $56 – an increase of more than 330%.
The issue though, is that the increase in excise and thus prices, while being excellent for reducing smoking rates, also got to a point where smokes were so expensive that those who were still smoking were more prepared than in the past to seek out illegal cigarettes.
The price had risen so high it had become, in effect, a financial prohibition, and as we know, prohibition always leads to black market operators.
And unfortunately, illegal products are always going to be cheaper.
So, is the solution to cut the excise?
Tobacco companies would say so, and their history of caring about the health concerns of people is unimpeachable…
The problem is, while it seems pretty clear that the excise raised the price of cigarettes too high so as to encourage the black market, cutting the excise essentially just means the government is trying to get into a price war with criminals. A war it likely won’t win – and which is likely not going to help reduce smoking rates.
One Nation’s suggestion to cut the excise by 75% is utterly ludicrous. It would take the excise back to where it was in 2013, and in real terms back to where it was in 2001.
That isn’t a policy to reduce illegal smoking; it’s a policy to increase all smoking.
There’s a decent debate to be had about what to do about illegal smoking in Australia, but the issue always needs to be about reducing smoking and nicotine consumption.
One Nation has come up with a policy that would have tobacco companies absolutely cheering.
