Higher tax on smokes opens door to black market: Imperial

Higher tax on smokes opens door to black market, Imperial Tobacco says

By Hannah Lynch

May 24 (BusinessDesk) - Imperial Tobacco, whose brands in New Zealand include Drum, Horizon and Peter Stuyvesant, said 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 percent 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 in a statement. "The most recent study from Australia shows smokers have moved from purchasing unbranded tobacco to counterfeit and contraband tobacco."

"Policy makers 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 $746 million 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 modeled the impact on smokers' behavior 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.

(BusinessDesk)

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