Tax rise for alcohol and cigarettes backed

Picture / Brett Phibbs

The Government should consider increasing tax on alcohol and tobacco to improve public health, says its lead social agency.

The controversial recommendation to hit consumers with further taxes emerged a day after the Government ruled out taking the Treasury's advice to cut personal and company tax rates.

The advice - which would affect hundreds of thousands of New Zealand alcohol or tobacco buyers - was given by the Ministry of Social Development in its briefing to the Government, released yesterday.

The ministry said new pricing and tax increases would further control the use of tobacco and alcohol, which had dangerous, and sometimes fatal effects on the lives of many New Zealanders.

Social Development Minister David Benson-Pope said the Government was not actively considering any proposal to increase the price of or tax on alcohol and tobacco, but did not rule it out.

"I'm open-minded on these issues. We clearly have some problems. A lot of people are very unhappy about the availability of alcohol to younger people at the moment and that is evidenced in the debate about the drinking age.

"So we clearly need to consider whatever elements or strategies people want to throw into the mix."

Mr Benson-Pope said there was no denying the damage caused by alcohol and tobacco and the Government had made substantial progress to reduce the harm.

"So it would be stupid to say we shouldn't continue down that good path. But I am saying there are no proposals that I am aware of at the moment."

Tobacco smoking, including second-hand cigarette smoke, kills 5000 people in New Zealand a year - 18 per cent of all deaths - and the ministry said alcohol, when abused, caused harm, particularly violence, injuries and accidents.

The ministry also recommended further regulation of alcohol and tobacco, social marketing and mass education campaigns to raise awareness, and improved support services.

The Government will be cautious about the public outcry likely to result if further taxes are placed on the products.

Two years ago it was criticised when it put an excise tax - dubbed the "sherry tax" - on alcoholic beverages containing between 14 per cent and 23 per cent alcohol in a bid to price cheap, light spirits out of the reach of young people.

But the category included port and sherry - drunk predominantly by older people - and winegrowers say it effectively destroyed the fortified wine industry.

The ministry's recommendation to increase the tax has been welcomed by the Alcohol Advisory Council and the Drug Foundation, which say an increase is the most effective way to stop people abusing alcohol and smoking.

Drug Foundation chairman Tim Harding said a price increase would immediately reduce harm.

"We can educate people as much as we like, but the things that have the greatest effect on alcohol and other drug use is changes in legislation - such as the inability to smoke inside - and the raising of taxes."

Alcohol Advisory Council chief executive Dr Mike MacAvoy said alcohol should have a minimum price to prevent supermarkets and liquor stores reducing prices to undercut one another.

"Without doubt when you increase the price, even those who are dependent on alcohol will also reduce their consumption because generally they are on fixed incomes."

But the alcohol and tobacco industries were less enthusiastic.

Beer Wine and Spirits Council chief executive Nicki Stewart said any increase would have a major effect on the industry, which already contributed a large amount in taxes.

Ms Stewart said the council was behind reducing the harm alcohol might cause, but a culture change in drinking patterns was needed.

British American Tobacco spokesman Carrick Graham said the tobacco industry was also heavily taxed - about 75 to 78 per cent of the price of a packet of cigarettes is tax.

Any price rise would encourage blackmarket sales. 
 
Filling up coffers

* $500 million: taxes from the beer, wine and spirit industry.

* $1.2 billion: taxes from the tobacco industry.