Tax rises choking smokers’ wallets
Smokers on the average wage could be paying as much in tobacco tax as they pay in income tax by 2025, according to a report by the Taxpayers’ Union lobby group.
Its executive director, Jordan Williams, called for a different way to tackle smoking other than increasing tax, saying the ‘‘social costs’’ of the ever-tighter squeeze on smokers’ wallets included financial hardship and increased crime.
Smokers face another price hike today as the tax on tobacco products goes up by 10 per cent. The increase is the second in a series of four annual 10 per cent tax hikes that were announced in the 2016 Budget.
Prior to the tax change yesterday the cheapest packet of 20 cigarettes was priced at $18.90 at one popular online ‘‘discount’’ store, with premium brands costing $25 and up.
A report released by the Taxpayers’ Union on the eve of the tax hike said the average smoker was nearly $3000 a year worse off than in 2010.
By 2025 – if tobacco tax continued to climb at the same rate – a smoker on the median wage who smoked a packet a day would be paying about 17.5 per cent of their after-tax income on tobacco duty, the lobby group’s report said.
‘‘Given the average earner pays 17.5 per cent tax on most of their income, this level of tobacco excise [would] effectively see a smoker pay twice the level of tax in comparison to others on the average wage,’’ it concluded.
Quitline chief executive Andrew Slater said tax increases did motivate smokers to ‘‘want to quit’’.
The support group expected calls to its helpline to double over the New Year period.
But the Taxpayers’ Union report questioned whether the link between cost and quitting was strong enough to make further tax increases the best tool to reduce smoking.
Despite tobacco prices rising 60 per cent since 2012, only one in 10 adult smokers had quit and there had been no statistically significant drop in smoking rates among Maori and Pacific Islanders over the last decade, it said.
The Treasury estimates a 10 price rise in the price of tobacco can be expected to cut consumption by between 3 per cent and 5 per cent, and to reduce the number of smokers by 2.5 per cent.
Slater said increases in tobacco tax were an important factor in stopping people taking up smoking in the first place. ‘‘The number of 15-to-17 years-olds who are smoking has fallen from 12,000 in 2016, to 8000 in 2017.’’
British American Tobacco estimates smokers spend $2.5 billion on cigarettes and tobacco in New Zealand each year, with about 74 per cent of that going to the Government in tax.