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05 May 2016

The Federal Government will push the cost of a packet of 25 cigarettes to $40 by the end of the decade after unveiling a plan to hike the tobacco excise.

A year after the AMA released a Position Statement calling for repeated real increases in tobacco taxation, the Government has unveiled plans which replicate Labor’s policy to increase the excise by 12.5 per cent a year over four years, raising $4.7 billion. The first excise increase will take effect on 1 September next year.

But whereas Labor, using Parliamentary Budget Office calculations, estimated the tax hike would reap an extra $47.7 billion in revenue over 10 years, the Government said Treasury estimates indicated that it would generate a more modest $28.17 billion in tax income.

The discrepancy sparked a war of words between the major political parties, with the Coalition claiming Treasury’s analysis had blown a $20 billion hole in the Opposition’s policy costings. But Labor’s Treasury spokesman, Chris Bowen, rejected the claim and said it would recalibrate its revenue estimates in light of Treasury’s updated figures.

Either way, the measure is seen as a positive move for efforts to encourage smokers to quit and deter young people from picking up the deadly habit.

The proportion of adults smoking on a daily basis has virtually halved in the last two decades, from more than 26 per cent in 1993 to 13.3 per cent in 2013, and much of the reason for the decline has been attributed to the rising cost of cigarettes. 

Historically, smoking rates have dropped every time there has been an increase in the tobacco excise, and a survey of smokers in New South Wales in 2010 found almost half had changed their behaviour as a result of a price increase, including 28 per cent who tried to quit and a third who cut down on their intake. Importantly, younger smokers were the most likely to try to quit as a result of a price hike.

An average pack of 25 cigarettes currently costs between $25 and $30, and health advocates said that pushing it to $40 would help drive more to quit.

Melbourne University Professor of Public Health Rob Moodie said that increasing the cost of cigarettes through taxation was “the most effective way of decreasing the number of Australians who die or get ill from smoking”.

But, writing in The Conversation, Professor Moodie lamented that little of this extra money was likely to be reinvested in preventive health programs, as has been advocated by the AMA.

He argued that because excise increases were effective in reduce smoking, the Government should also consider a tax on sugar and increasing the excise on high alcohol drinks.

Accompanying the excise hike, the Government has announced that the duty free tobacco allowance will be cut to 25 cigarettes or their equivalent from 1 July next year.

The Government admitted these measures could increase the risk that people would try to smuggle tobacco into the country, and has committed an extra $7.7 million over four years to combating the trade, along with increased penalties.

In addition, the Government has committed to continue funding the defence of Australia’s ground-breaking tobacco plain packaging legislation against legal challenges being mounted by tobacco companies and tobacco-exporting countries.

“Tobacco plain packaging is a critical part of the Government’s comprehensive range of tobacco control measures, and has been effective in reducing smoking,” the Health Department said. “The Australian public can be assured the Government will continue to do all it can to defend tobacco plain packaging.”


Adrian Rollins

Published: 05 May 2016