Treasury opposed increase in tobacco tax

The Treasury opposed the increase in tobacco excise, previously secret Cabinet papers reveal.

The papers, obtained by the Herald under the Official Information Act, show Treasury officials were sceptical about advice from the Ministry of Health on price and tax increases in tobacco control policy.

The Government in April increased the excise on cigarettes by 10 per cent and on loose tobacco by 24 per cent.

Both will be subject to further rises of 10 per cent in each of the next twoyears.

The ministry calculates this will lead to reduced tobacco use, 40,000 fewer smokers and the prevention of 300 smoking-related deaths a year by 2021.

But in a paper obtained from Associate Health Minister Tariana Turia, the Treasury recommended that the tax not be changed and the ministry "prepare a tobacco control strategy using a range of policy tools".

"Excise is claimed to be the most effective anti-smoking policy, yet it is not highly effective," says the Treasury comment section of the paper.

But the alternative view is predominant in the paper.

Quoting the World Health Organisation, the paper says: "Increasing the price of tobacco through higher taxes is the single most effective way to decrease consumption and encourage tobacco users to quit.

"New Zealand research supports this conclusion," it says, citing a review of evidence for the ministry by Associate Professor Nick Wilson and colleagues from Otago University at Wellington.

Dr Wilson said yesterday: "Probably the most authoritative reference is the World Bank saying prices and taxes were the most effective measure.

"Don't Treasury think price signals work? The whole of economic theory is around if prices increase, demand goes down, so it's pretty bizarre to me that they say that."

Christchurch tobacco expert Dr Murray Laugesen said that after a big increase in tobacco tax in 2000, about 80,000 smokers quit smoking for several months but then resumed, leaving little enduring effect on smoking prevalence.

This was because the tax on loose tobacco was not equalised, leaving thin roll-your-own cigarettes cheaper than factory-made products.

The tax rises would lead to reduced tobacco consumption, but the effect on smoking prevalence was uncertain.

The Government-financed smoking Quitline said about 2100 people had called it each week since the tax increase - a 100 per cent increase.

Dr Wilson said that to be most effective, tax rises needed to be large - preferably at least 20 per cent - and regular.

"They should be combined with big mass-media campaigns, with smokers reminded of the next price rise and having that combined with a quit date to get the synergies working."

He said it was unfortunate the Government had given up on the idea of putting the extra tax money into programmes to help smokers quit.

"It just looks like another tax grab. It's unethical."