Tuesday 4 August 2009

Litter study identifies missed tobacco tax revenue

A study of street-collected cigarette packs indicates the Government is missing out on at least $36 million dollars of tax because of the consumption of foreign duty free cigarettes and those purchased in other countries.

Public health researchers from the University of Otago, Wellington determined the percentage of ‘foreign’ cigarettes by collecting 1310 empty cigarette packs from the streets of four cities and six towns.

“We found that 3.2% of discarded cigarette packs we analysed were from outside the country, and this means a significant revenue loss for New Zealand,” says the lead investigator Dr Nick Wilson.

“The $36 million of missed tax revenue from tobacco tax and GST, if the cigarettes were bought in NZ, are funds that could be used for quitting campaigns” he says.

Dr Wilson also notes that the cheaper tobacco from these foreign cigarettes also means that there is less incentive for New Zealand smokers to quit, increasing the harm to their health and costs to the health system.

Dr Wilson believes the missing tax is actually much higher than calculated in this study as it was not possible to determine which NZ branded cigarettes had been bought duty free when people entered this country. One of the three major tobacco companies operating in New Zealand reported in 2008 that duty free sales accounted for 7% of sales.

“The scale of this revenue loss and the health implications are a strong argument for the Government to consider ending the sale of duty free tobacco on entry to New Zealand, and to remove any duty free allowance for incoming passengers, as in Singapore. A further possibility is to ban the carrying in of any amount of tobacco altogether,” he says.

The study found that Australia was the most frequent source of foreign packs (45%), followed by China (16.7%) and then 11 other countries or regions. The analysis of the packs did not indicate significant smuggling activity into New Zealand. However, the authors recommend that international ‘coding and tracking’ systems are improved so that smuggling is easier to identify.

One of the co-authors of the study, Dr George Thomson, says further options, other than a total ban on imported tobacco for personal use, include for New Zealand to argue for a changed international agreement on duty free tobacco as part of the Framework Convention on Tobacco Control discussions. Another avenue is to explore bilateral approaches with Australia on removing duty free tobacco sales on both sides of the Tasman.

The foreign packs in this study were easily identified because they lacked the graphic warnings required for NZ cigarettes and there was no use of Maori language on the warnings. This NZ study of discarded cigarette packs is only the second published in the world, with a previous study on a survey of packs in French rubbish.

This kind of research is important says Dr Wilson as there is no other easy way to find out information on the movement of foreign tobacco products.

This study was part of the NZ arm of an international study, “The International Tobacco Control Project”. The project receives funding from the Health Research Council and has been published in the international journal, Tobacco Control.

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