BUDGET 2012: higher tobacco tax may encourage black market

Imperial Tobacco says the tax hike announced in today's Budget opens the door to increase New Zealand's illicit usage.

BUSINESSDESK: Imperial Tobacco says the hike in tobacco tax announced in today's Budget opens the door to increase New Zealand's illicit usage.

Finance Bill English this afternoon announced the excise on tobacco will rise by 10% a year for the next four years.

The tax hike is expected to raise $1.4 billion. By 2016, a packet of 20 cigarettes will cost $20, or $1 per cigarette, the Treasury papers said.

"The government could shoot itself in the foot with this policy decision by creating a lucrative black market for tobacco," Imperial Tobacco’s Brendan Walker said.

His company's brands in New Zealand include Drum, Horizon and Peter Stuyvesant.

"The most recent study from Australia shows smokers have moved from purchasing unbranded tobacco to counterfeit and contraband tobacco.

"Policymakers must remember we are a legal company selling a legal, highly regulated product to consenting adults whose right to use our product, of their own free will should be respected," he said.

The Crown collected $145 million in excise from locally produced tobacco and a further $746m from taxes on imported tobacco, according to the government's financial statements for the nine months ended March 31.

A Ministry of Health discussion paper released last month modelled the impact on smokers' behaviour if the price of a packet of 20 cigarettes rose to $100 over the next eight years from around $16 today, to help achieve the goal of a smokefree New Zealand by 2025.
 

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