Tobacco prices are leading to murders and assaults in dairies, Acting Prime Minister Winston Peters says.
A KPMG report commissioned by Imperial Tobacco NZ found that the Government lost up to $182 million in excise from the 9 per cent of tobacco that had been obtained illegally in 2017.
Imperial Tobacco said eight years of "aggressive" excise increases contributed to illicit tobacco consumption.
"The attractiveness of the illicit market will continue to grow over the next two years as further legislated annual 10 per cent increases on tobacco excise drive the legitimate market retail prices higher," said Imperial Tobacco New Zealand's general manager Sam Abbott.
Peters said "of course" there was a link between excise tax and illicit tobacco use, but he went even further, linking it to attacks on shop workers.
"It's leading to people being murdered and assaulted in our dairies."
But Peters, speaking to reporters during his weekly post-Cabinet press conference, said close to $2 billion in excise on tobacco was being collected but only about 3 per cent of that was going on smoking minimisation.
"The money's not going for the purpose for which it's being collected in the first place," he said.
Peters hinted there could be changes but said it could not all be done at once.
"We've also got the situation where we will be having to re-adjust the fiscals in the economy at the same time and you can't do them all at once."
A goal to make New Zealand smokefree by 2025 has all but evaporated because although the smoking rate has declined, it remains stubbornly high among some groups, including young Maori.