2013/15: Should cigarettes be taxed more heavily?
What they said...
'It is going to increase the cost of living for smokers [including] pensioners, low-income people'
Shadow treasurer, Joe Hockey
'It's a myth that poor smokers will be disadvantaged by a tobacco tax rise. They're the ones who are suffering most from tobacco, dying at higher rates and spending more on tobacco and related health costs'
Anne Jones, the chief executive officer of ASH Australia
The issue at a glance
On August 1, 2013, the treasurer Chris Bowen confirmed that the Rudd Labor government would increase the tax on cigarettes. Mr Bowen announced that the mini budget would contain a series of four 12.5 per cent annual increases in federal tobacco excise, pushing the price of cigarettes closer to the dollar-a-ciggie mark. The hikes are scheduled to occur on: December 1, 2013; September 1, 2014; September 1, 2015; and September 1, 2016 and to raise $5.3 billion over the four-year period.
The tobacco tax rise, a 50% increase over four years, raises the price of an average pack of cigarettes by a dollar in the first year and by up to $5.25 by the end of 2016. It will push the price of a packet of cigarettes to more than $20 in 2016.
The Coalition initially indicated it may keep Labor's pledge to increase the tobacco tax, were it to win government; however, some days after the Labor announcement and during the election campaign, the Opposition's shadow treasurer, Joe Hockey, claimed that if elected to government his party would want to consult further before deciding to proceed with the tax. The Coalition's position on this question is not yet clear.
The tax has been praised by a range of public health spokespeople and criticised by the tobacco industry.
Tobacco taxes in Australia
Tobacco taxes are favoured by governments because of their relatively low level of unpopularity with voters and because of their low administrative costs relative to the income they generate.
A variety of taxes are applied to cigarettes and other tobacco products internationally. Virtually all countries apply excise duty specified as an amount payable per x number of cigarette sticks. A small number of countries charge excise payable per x grams of tobacco weight.
Federal excise and customs duty
The federal government has imposed excise duty on Australian-made and customs duty on imported tobacco products since the passage in 1901 of the Excise Act and the Customs Act. Prior to federation, the colonies imposed their own tariffs.
Until 1999, federal excise and customs duty was calculated on the basis of the weight of tobacco products. The Excise Regulations 1925 specified precisely how manufacturers needed to label, calculate and declare excise duty. These also specified how the weight of tobacco products (and the volume of alcohol and petroleum products) was to be calculated. For cigarettes, this included the weight of filter and paper, but not the weight of the packaging.
In the early years of last century, manufactured tobacco was charged at a rate of one shilling per pound (of product weight) and cigars were taxed at one shilling and sixpence per pound. Since 1920, the rate of the duty has been set out in (frequently amended) schedules to the Excise Tariff Act passed in 1921. Historically, duty on tobacco in cigarettes was levied at a higher rate than duty on non-cigarette tobacco.
In November 1983, the then federal treasurer, the Hon. Paul Keating, changed customs and excise policy in several ways. First, the rate of federal excise and customs duty was linked with the Australian Consumer Price Index (CPI), meaning that since that time, excise and customs duty have automatically increased in February and August each year in line with the CPI for the six months to the previous December and June. Second, the rate of duty for cigars was immediately made equal to that of cigarettes. Third, the rate for non-cigarette tobacco was increased by $5 a kilo. In subsequent budgets the rate for smoking tobacco was increased further (by another $5 a kilo in the 1984 and 1985 budgets, and then by $1.90 in the 1986 budget).
Throughout the 1990s, health groups lobbied for increases in federal excise duty. In addition to the six-monthly CPI increases, the government increased the rate of federal excise applicable to cigarettes and other tobacco products on several occasions. These included a $5 per kilo increase in 1992 and increases announced in the 1993 budget of 3% in August 1993 and 5% in February and August 1994 and February 1995. The final increment rise of 5% planned for August 1995 was brought forward and increased to an immediate 10% rise in the Federal Budget handed down on 10 May 1995.
State tobacco licence fees
In November 1974 Victoria became the first Australian jurisdiction to introduce a licence fee (known as a business franchise fee) on the sale of tobacco products. The business franchise fee on tobacco had two components. The first was a set amount charged each year. The second was an amount based on the value of tobacco sold in the immediately preceding month. The monthly (variable) rate was set at 2.5% in 1974 increasing to 10% in 1975. Between 1975 and 1989, all state and territory governments introduced similar fees.
The fixed licence fee and the percentage levy varied from state to state. Generally the fees were forwarded to state or territory government revenue collection offices by tobacco wholesalers; however, if retailers purchased stock from suppliers other than licensed wholesalers, they also were required to pay both the set and the variable licence fees. The percentage component was by far the more lucrative for governments, and the rate of the levy was frequently increased in all jurisdictions, sometimes more than once within the same budget period.
On August 15, 2013, The Guardian published a report in which it considered recent statements made by the Abbott-led Australian Opposition suggesting it may keep the increases in tobacco excise proposed by the Rudd Government.
The full text of this article can be found at http://www.theguardian.com/world/australia-news-blog/2013/aug/15/tony-abbott-tobacco-tax-rise
On August 6, 2013, The Courier Mail published an opinion piece by Dr Paul Williams, a senior lecturer at Griffith University School of Humanities. The piece is titled 'Kevin Rudd's tax hikes on tobacco will save lives and cut health system costs and should be applied to alcohol'
The comment argues for the benefits of taxes designed to reduce dangerous behaviours among consumers.
The full text of this article can be accessed at http://www.couriermail.com.au/news/opinion/kevin-rudd8217s-tax-hikes-on-tobacco-will-save-lives-and-cut-health-system-costs-and-should-be-applied-to-alcohol/story-fnihsr9v-1226691674874
On August 6, 2013, The Australian published an opinion piece by Professor Judith Sloan in which she criticises taxes on tobacco products, in part on the grounds of social equity.
The full text of this article can be found at http://www.theaustralian.com.au/opinion/columnists/poor-smokers-are-an-easier-target-than-mining-companies/story-fnbkvnk7-1226691670434
On August 5, 2013, Bloomberg Professional, a United States-based news and information site servicing the business sector, published 'Australian Smoking Rate to Beat U.S.'s on Tax: Chart of the Day'. The site publishes a chart each day offering significant information on a current news topic. This chart compares decreases in national smoking rates in Australia, the United States, China, Germany, France and Japan. The chart is accompanied by an article commenting on Australia's intention to increase the excise on tobacco products.
This material can be accessed at http://www.bloomberg.com/news/2013-08-04/australian-smoking-rate-to-beat-u-s-s-on-tax-chart-of-the-day.html
On August 5, 2013, The West Australian reported on comments made by the Opposition shadow treasurer, Joe Hockey, that a Coalition government would reconsider whether increased taxes should be imposed on tobacco products because his party had concerns about their impact on lower socio-economic groups.
The full text of this news report can be accessed at http://au.news.yahoo.com/queensland/a/-/australian-news/18356639/hockey-raises-doubt-over-tobacco-tax-hike/
On August 2, 2013, Crikey published an analysis by Henry Belot in which he considers increases in tobacco excise as both a revenue raising measure and a public health initiative.
The full text of this article can be found at http://www.crikey.com.au/2013/08/02/tax-hike-will-smokers-cough-up-or-butt-out/
On August 2, 2013, The Conversation published an opinion piece by Dr Becky Freeman, a Public Health Researcher at the University of Sydney, titled 'Tobacco tax rise will help smokers butt out for good'. The piece argues that tobacco excise leads to reductions in smoking.
The full text can be accessed at http://theconversation.com/tobacco-tax-rise-will-help-smokers-butt-out-for-good-16608
On August 1, 2013, the treasurer, Chris Bowen, issued a joint press release with the health minister, Tanya Pilbersek, titled 'Government to increase tobacco excise'
The full text can be accessed http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2013/015.htm&pageID=003&min=cebb&Year=&DocType=
On August 1, 2012, Bloomberg Professional, a United States-based news and information site servicing the business sector, published an article by Jason Scott titled 'Australia to Raise Tobacco Tax to Narrow Budget Shortfall' The piece looks at a range of possible justifications for the tax increase but focuses on its implications for reducing the budget deficit.
The full text can be accessed at http://www.bloomberg.com/news/2013-07-31/australia-to-raise-tobacco-excise-to-narrow-budget-shortfall.html
On August 1, 2013, the ABC opinion site, The Drum, published a comment by Annabel Crabbe titled 'Ciggie stardust: is this really a win-win dash for cash?' which questions whether tobacco excises can be effective as both a revenue-raising measure and a public health measure.
The full text can be accessed at http://www.abc.net.au/news/2013-08-01/crabb-ciggie-stardust/4858900
ACOSH (Australian Council on Smoking and Health) has published an article by Professor Ian Olver, CEO of the Cancer Council Australia and Maurice Swanson, the National Heart
Foundation's tobacco control spokesperson. The piece is titled 'With so many opinions on tobacco tax, let's look at the facts'. It presents counter arguments to a series of claims made against increase the tax on tobacco products.
The full text can be accessed at http://www.acosh.org/resources/tobaccotax.pdf
On July 31, 2013, the ABC ran a news report titled 'Kevin Rudd flags increase to tobacco excise ahead of release of Government's economic statement'
The piece includes the government's justifications for the proposed increase in tobacco excise. The text can be accessed at http://www.abc.net.au/news/2013-07-31/rudd-flags-tobacco-tax-increase/4855836
On July 31, 2013, ASH Australia and the Australian Heart Foundation issued a combined press release in which they urged the federal government to increase the excise on tobacco products. The piece explains the links between increased tobacco taxes and reductions in smoking rates.
The full text can be accessed at http://www.ashaust.org.au/mediareleases/130731.htm
In April 2012, The Institute of Public Affairs published a monograph by Julie Novak, a senior fellow with the Institute, titled 'Nanny State Taxes: Soaking the Poor in 2012'. The 36-page treatment presents a series of arguments against taxes designed to modify people's behaviour.
The full text can be accessed at http://www.ipa.org.au/library/publication/1335389416_document_novak_nannystatetaxes.pdf
The Australian federal Treasury has produced a background paper examining tobacco excises as both a public health measure to reduce smoking rates and as a revenue raising measure. The piece concludes that to continue to function as a revenue raising measure such excises have to be regularly increased.
The full text of this paper can be accessed at http://www.treasury.gov.au/~/media/Treasury/Access%20to%20Information/Disclosure%20Log/2011/Plain%20packaging%20of%20tobacco%20products/Downloads/Document_57.ashx
British American Tobacco Australia's internet site has an entry on tobacco taxation in Australia in which it refers to current rates of tobacco taxation and makes comparisons with the rest of the world. The material dates from 2012-2013.
This material can be accessed at http://www.bata.com.au/group/sites/BAT_7WYKG8.nsf/vwPagesWebLive/DO7WYLJ9?opendocument&SKN=1
The Australian Heart Foundation's 2007 background paper on Tobacco and cardiovascular disease which gives detailed information on the cardiovascular damage attributable to smoking can be accessed at http://www.heartfoundation.org.au/SiteCollectionDocuments/TobaccoandCardiovascularDiseasePolicyPaper.pdf
The Australian Institute of Health and Welfare's internet site dealing with the health risks associated with tobacco smoking can be accessed at http://www.aihw.gov.au/risk-factors-tobacco-smoking/
Arguments against taxing cigarettes more heavily
1. Increasing the tax on cigarettes imposes a disproportionate burden on the economically disadvantaged
It has been repeatedly claimed that taxing cigarette consumption places an unfair burden on the economically disadvantaged. This claim rests on two facts. Firstly, a far greater percentage of the lowly paid and relatively less well-educated section of the population smokes. Secondly, the excise they pay on the cigarettes they smoke affects them proportionately far more as this section of the population has lower incomes.
This claim has been made by Judith Sloan, contributing economics editor for The Australian and Professor Judith Sloan, Honorary Professorial Fellow at the Melbourne Institute. Professor Sloan has stated, 'Labourers and related workers are three times likelier to smoke than professionals.
Smoking rates among indigenous Australians are also significantly higher than among the rest of the community. In 2008, it is estimated that nearly half of male indigenous Australians smoked and 44 per cent of female indigenous Australians.
The rate of smoking among indigenous Australians has not changed in more than a decade.'
Professor Sloan has further noted, 'the bottom 20 per cent of households pay one-third more tobacco excise tax on average than the top 20 per cent. It is the poor who smoke and pay a disproportionate share of the excise. In the words of Julie Novak, a senior fellow at the Institute of Public Affairs, it is a case of "soaking the poor" - not the rich.'
As Professor Sloan notes, Dr Julie Novak , a senior fellow with The Institute of Public Affairs has claimed that a tobacco tax increase unfairly punishes lower-income families, who 'pay up to three times as much as wealthy families in nanny state taxes'.
In her background paper 'Nanny State Taxes: Soaking the Poor in 2012', Dr Novak states, 'The lowest fifth of income earners pay over six per cent of their total income as tax on alcohol, foods and tobacco. For all income categories the average tax paid out of income is about three per cent, and as low as two per cent for the highest earners in the Australian income distribution.'
Referring to the currently proposed increase in tobacco excise, shadow treasurer, Joe Hockey has stated, 'It is going to increase the cost of living for smokers but smokers could be pensioners, low-income people, it could be smokes and beers might be the thing that is important to them.
I want to know what the impact is on lower income people of just increasing their cost of living.'
2. Increasing the tax on cigarettes will encourage the illegal tobacco industry in Australia
A spokesperson for British American Tobacco, Scott McIntyre has claimed that the illegal tobacco market was also to 'flourish' as a result of higher taxes on cigarettes. He said the market would be flooded with illegal products in order to provide cheaper tobacco to consumers.
Mr McIntyre claimed, 'It's alarming the illegal tobacco market has grown nearly 150% in just three years, from 6.4% of the total market in 2007 to 15.9% in 2010.'
Mr McIntyre has stated, 'We've just seen the Australian Crime Commission... release a report that says organised crime groups see illegal tobacco as a low-risk, high-profit activity. They see it as a market where large profits can be made with minimal detection...
Essentially, this tax grab hits smokers in the hip pocket while it lines the pockets of organised criminal gangsters.'
The British American Tobacco Internet site notes that a 2012 report on the illicit trade of tobacco in Australia found that counterfeit and contraband tobacco has tripled in one year. A total of 407,000 kilograms was estimated to be consumed in 2011 compared to an estimated 116,000 kilograms in 2010.
Contraband cigarettes are counterfeit or genuine packs but have been smuggled into the country and tobacco excise has not been paid on them. The same report stated 'Organised crime gangs importing loose leaf tobacco, counterfeit and contraband are now the fourth largest tobacco player in Australia just behind Imperial Tobacco which holds 17% of the legal market.'
The report further concluded, 'It seems when the Government increases price through excise, consumers look for cheaper alternatives, with ... lower price [being] a key reason 60% of people bought illegal products.'
3. Increasing the tax on cigarettes is a politically expedient budgetary measure
It has been claimed that increasing the tax on cigarettes is primarily a revenue-raising measure that the government is masking behind the claim that it is a public health initiative.
In an analysis printed in the Courier Mail on August 1, 2013, it was claimed, 'Average cigarette packets will be pushed well over $20 under the plan the Government says is aimed at cutting smoking rates. But Labor will only spend a portion of the money raised on cancer treatments, despite portraying the hike as a public health initiative.'
When he was last Prime Minister, Kevin Rudd lifted tobacco excise by 25 per cent in April 2010; the increase was directed into the health budget. On this occasion, the treasurer, Chris Bowen, has indicated that he would only commit to spend some of the money on tobacco-related diseases.
Mr Bowen has stated, 'This increase in excise serves several purposes: it provides funds for cancer-related health services; it deters young people from taking up smoking; and of course, it alleviates some of the revenue impacts on the Budget.'
The shadow treasure, Joe Hockey has been openly sceptical of the Government's attempt to link the increase in excise to public health issues.
Mr Hockey has stated, 'Again, it's Kevin Rudd running out of taxpayers' money and just going for the nearest solution, which is not about health.'
Judith Sloan, contributing economics editor for The Australian argues that smokers are taxed at a fair higher rate than would be required to meet the costs they impose on the public health system. Ms Sloan has stated, 'According to the Cancer Council, tobacco use accounts for less than 8 per cent of the total burden of disease and injury in Australia. The social cost of smoking probably amounts to several hundred million dollars a year; $1bn at most. hundreds of millions of dollars per year - a billion dollars, at most.
Given that total excise from tobacco will be $8.3bn this financial year, there is absolutely no doubt that smokers are grossly overtaxed, even before the higher rates of excise come into effect.'
4. Tobacco taxes are not a stable source of government revenue
It has been claimed that increasing taxes on tobacco products is not a reliable means of gaining taxation revenues. Two reasons have been offered for this.
One is that as the excise level increases, mainly seriously addicted smokers, who cannot give up the habit, buy their cigarettes illegally on the black market. These cigarettes obviously yield no taxation revenue to the government.
The other reason offered is that the number of people smoking within the Australian community has dropped dramatically over the last twenty-five years and so the taxation base from which the excise can be drawn has declined and is likely to decline further.
This paradox was explained by Annabel Crabbe in the ABC's opinion site The Drum. Crabbe has argued, 'In truth... you can't have a tobacco tax increase that is both a successful public health initiative and a robust ongoing source of revenue.
The long-term success of either purpose is entirely predicated on the failure of the other; either you eliminate smoking altogether, in which case no revenue, or you continue coining it for generations, in which case people continue to die with cancer.'
5. Smoking rates are falling without the addition of further taxes
There are some critics who dispute that continually increasing the cost of cigarettes through increasing the excise on tobacco is necessary to prevent people smoking.
In an article published in Crikey on August 2, 2013, it was noted 'Australia's tax rate on tobacco currently accounts for 61.3% of the final price of a typical pack of cigarettes according to 2012 Treasury statistics. This means that Australia is falling short of the World Health Organisation's benchmark that cigarettes be taxed at 70%. Australia's tax rate is less than the 72.27% in New Zealand and well short of the 79.89% in France or 79.16% in Spain.'
Despite this, Australia has been highly successful at decreasing the rate at which its population smokes. Australia has some of the lowest rates of smoking in the world. Generally, smoking rates for Australia have declined over recent years from 34% in 1980 to16.6% in 2007 being daily smokers.
Current smoking and smoking rates have declined in teenagers of every age. Between
1999 and 2005, rates almost halved among students aged 16-17 years. Among younger students, the rate in 2005 was barely one-third the rate in 1984.
Among people who still smoke, the number of cigarettes smoked each day has been steadily declining since 1989. The percentage of people who can be classified as heavy smokers has also been declining, with corresponding increases in the percentage of people who self-classify as light smokers.
Critics of the recently proposed tax increases note that Australia's suite of anti-smoking measures, including bans on smoking in work places and public areas; restrictions on the age at which cigarettes can be purchased; plain packaging of cigarettes and the wide-spread public education campaign warning of the dangers of cigarette smoking have been demonstrably successful in reducing rates of smoking.
Arguments in favour of taxing cigarettes more heavily
1. Increasing the tax on cigarettes will promote public health
Cigarette smoking has been shown to pose a major risk to health. Any action that reduces the number of people who begin or continue to smoke will help to advance their health.
The Prime Minister, Mr Rudd, has stated, 'Around 30 per cent of cancer is caused by tobacco consumption and it's estimated this will kill 15,000 Australians each year. That is far too many and it's also really expensive for the country to deal with. We need to get serious on this major driver of cancer in Australia.'
The federal treasurer, Chris Bowen, has also stated, 'We all know that far too many people die from cancer in Australia.
There are 16 types of cancer caused by smoking, and every Australian family I think would have been touched by one of those cancers caused by smoking.'
Health groups like the Australian Medical Association, the Cancer Council, Quit Victoria and the National Heart Foundation praised the measure, saying it would save lives.
The Cancer Council and the Heart Foundation have stated, 'Smoking is responsible for 20.1% of the disease burden due to cancer, and 9.7% of the disease burden due to cardiovascular disease.' These figures apply to 2003.
The Australian Institute of Health and Welfare has stated, 'Of all the risk factors for ill health, tobacco smoking is responsible for the greatest burden on the health of Australians...
Tobacco smoking is a major risk factor for: coronary heart disease; stroke; peripheral vascular disease; numerous cancers including cancers of the lung, mouth, oesophagus, larynx, kidney, pancreas, bladder, stomach and cervix and a variety of other diseases and conditions.
In 1998, an estimated 19,019 people died in Australia as a result of tobacco smoking. Around 13% of deaths from cardiovascular disease are due to smoking tobacco.'
2. Increasing the tax on cigarettes will increase the number of people who quit smoking
An increase in the cost of cigarettes as a result of increased taxes will led a significant number of smokers to give up the habit. The price of cigarettes is expected to rise markedly. It is expected that the price of a packet of 20 Winfield Blue cigarettes, for example, will rise by $0.98 after the first increase and by $5.25 by December 1, 2016.
In 2010, the Rudd government increased the price of cigarettes by 25 per cent. The federal treasurer, Chris Bowen, has claimed that this led to a reduction in smoking by 11 per cent. He suggested that on evidence from doctors and the Cancer Council, the government's latest move could stop an estimated 200,000 Australians smoking.
Paul Williams, a senior lecturer at Griffith University's School of Humanities, has also stated, 'There's overwhelming evidence that "sin taxes" reduce the consumption of legal but dangerous substances. In 2011, international research found that, for every 10 per cent of increased tax on cigarettes, we can expect 4 per cent of smokers to quit.
Indeed, Australian medicos claim Rudd's tobacco tax could see up to 200,000 Australian smokers give up the habit.'
Summing up the gains to be made Dr Becky Freeman, a Public Health Researcher at University of Sydney, has claimed, 'The Rudd government's forthcoming tobacco tax increase is the single most effective way to cut smoking and reduce the thousands of premature deaths that smoking causes each year. It's a gold star public health policy that is employed universally in nations that have successfully reduced smoking rates.'
ASH Australia has also stated, 'Raising the price of tobacco by taxation, and funding effective tobacco control policies, are proven effective methods of reducing smoking rates - and are consistent with social equity.'
3. Increasing the tax on cigarettes will reduce the number of people who begin smoking, especially among youth and the economically disadvantaged
It has been claimed that increasing the cost of cigarettes is a particularly effective means of discouraging people from beginning to smoke. The high price of the habit is believed to make establishing it seem less attractive. This is particularly the case among young people and those in more lowly paid jobs. Professor Ian Olver, the chief executive officer of the Cancer Council Australia has stated, 'This is very important, because disadvantaged groups bear a disproportionately heavy tobacco death and disease burden. And a modest tobacco tax increase would generate more than enough funding to provide tailored assistance programs for people on lower incomes struggling to quit.'
Anne Jones, the chief executive officer of ASH Australia, has also stated, 'It's a myth that poor smokers will be disadvantaged by a tobacco tax rise. They're the ones who are suffering most from tobacco, dying at higher rates and spending more on tobacco and related health costs. And people on lower incomes are more price-sensitive and will quit in greater numbers because of a tax increase.'
With regard to cigarette smoking among young people, the Cancer Council and the Heart Foundation have stated, 'Raising the price of tobacco products, particularly through manipulation of taxes or other imposts, is a key plank of a comprehensive tobacco-control policy, and is known to reduce smoking rates among younger smokers. Young people are particularly responsive to changes in cigarette prices given their relatively low disposable income.'
Anne Jones has also stated, 'We still have over 100,000 children who are weekly smokers and we now need a second increase to bring tobacco excise into line with world best practice.'
The Cancer Council and the Heart Foundation have further argued, 'Responsiveness to price among adolescents increases with intensity of smoking, since more committed smokers are more likely to purchase their own cigarettes. It is therefore likely that higher cigarette prices have their greatest impact among younger smokers when they are poised between experimentation and regular smoking.'
4. Increasing the tax on cigarettes will support federal finances
In August, 2013, the federal treasurer, Chris Bowen, announced that a decision to raise tax on tobacco would be one of the biggest revenue earners for the Government in its upcoming economic statement.
Mr Bowen said the $5.3 billion tax hike would be one of the biggest measures "in terms of revenue impact" in the economic statement. The treasurer further stated, "This is a decision which makes a contribution to returning the budget to surplus in 2016-17...'
Prior to the Rudd government's last increase in tobacco excise, a 2010 Treasury report on the significance of tobacco excise as a revenue raising measure stated, 'The excise revenue collected from tobacco is relatively stable. This is due to the effect of this per capita decline being largely balanced by the rate of population growth and the indexation on tobacco excise.'
However, it has been claimed that using tobacco taxes as a revenue-raising measure is unlikely to be successful in the long-term as, if the price increases serve to discourage smoking, tobacco sales will drop and so will the revenue return to government.
One means of addressing this problem is to increase the tax on cigarettes at a rate greater than the biannual rise in the Consumer Price Index (CPI). In his budget speech earlier in 2013, then treasurer Wayne Swan revealed that tobacco taxes would rise with average wages rather than inflation from March of 2014. This means the increase in tobacco excise would keep pace with income growth rather than the consumer price index, which tends to grow more slowly.
5. Increasing the tax on cigarettes will reduce the strain on the public health system
It has been noted that cigarette related illnesses place a large strain on the public health system. If the number of smokers can be cut back, this will result in a significance reduction in a major source of pressure on the health system. More than 750,000 hospital bed days per year in Australia are attributable to tobacco-related disease at an estimated cost of more than $31 billion a year.
The 2007 policy paper produced by the Heart Foundation on Tobacco and Cardiovascular Disease stated, 'In Australia, it has been estimated that smoking is responsible for 15,511 deaths each year and over 142,000 admissions to hospital annually...
Tobacco use imposes a significant financial drain on the community. For example, in 1998 health economists estimated that the non-voluntary and social costs of smoking were approximately $21 billion. These costs include healthcare expenditure, costs to smokers, their families and friends, costs to businesses, and the costs to public infrastructure.'
The Prime Minister, Mr Rudd, has further explained, 'There is a limit to the number of taxpayer dollars available to health.
I say again, when it comes to cancer, treating cancer and smoking-related cancers costs the Australian taxpayer hundreds of millions of dollars each year and frankly these are funds which we have to raise from the taxpayer.'
The federal Health Minister, Tanya Plibersek, has stated, 'There's a strong public health case for increasing the price of tobacco. Australia spends $31 billion [annually] on health care for ill smokers.'
Rob Moodie, professor of public health at the University of Melbourne, has stated, 'This rise will decrease consumption so in the long run reduce the burden on the health system, it will increase budget revenue, and it's in the interest of smokers themselves as it will help keep them alive.'
If, as opinion polls suggest will be the case, a Coalition government is elected on September 7, 2013, it will be interesting to see whether it proceeds with the Rudd government's planned increase in excise on tobacco products. The Opposition has given a mixed response to this proposal.
Historically, Liberal-National governments are less likely to adopt such policies which they tends to regard as unwarranted intrusions on decisions that people should be left to make for themselves.
Such measures are usually condemned by their opponents as the work of the 'nanny state', that is, governments that try to manage or control different aspects of voters' lives in the name of protecting them from harm. A wide range of laws and provisions, we now take for granted, have initially been condemned by their opponents as 'nanny state' intrusions. These include taxes on Alcopops, the compulsory wearing of seatbelts, the compulsory wearing of bike helmets and even the introduction of Medicare (then termed Medibank).
However, Australia has been highly successful over the last thirty years in discouraging smoking via a variety of strategies, which have included increasing the cost of tobacco products. The last tax increase brought in under Kevin Rudd's government is generally acknowledged to have led to a reduction in smoking in Australia.
Critics of the Coalition's opposition to such measures have sometimes accused them of acting out of self-interest as huge international tobacco companies have been substantial contributors to their party funds. (In 2004 the Labor Party changed its party funding policies to prohibit accepting donations from tobacco companies.)
In 2011 the Labor Party claimed that 97 per cent of British American Tobacco's political donations worldwide in 2010 went to the Liberal and National parties.
The then health minister, Nicola Roxon, stated in parliament, 'British American Tobacco, according to their own figures, made political donations in only three countries around the world in 2010.
In Canada, they made a donation of 1,000 Pounds ($1,500), in the Solomon Islands they made a donation of 2,000 Pounds ($3,000) and in Australia they made a donation, just to two parties in this place of 111,000 Pounds ($170, 720).
However, on August 22, 2013, Tony Abbott, as leader of the Liberal Party, pledged that his party would no longer accept donations from tobacco companies. It will be interesting to note whether this change in donations policy results in any change in attitude within the Liberal Party on smoking-related issues. For example, the Liberal Party has consistently opposed the introduction of plain packaging of cigarettes.
(Controlling donations to political parties remains a complex issue, as, for example, a tobacco company might continue to contribute to any political party via an associate company that was not obviously a tobacco producer.)
The Opposition has, in common with the Government, the medium-term goal of returning the nation's budget to surplus. During the election campaign, the Opposition indicated that it would attempt to do this over the next ten years. This relatively modest target would presumably be assisted by retaining the proposed increase in tobacco excise. Economic considerations may well encourage any new Coalition government to retain the scheduled increases in tobacco excise.
Newspaper items used in the compilation of this issue outline
The Australian: January 4, 2013, page 1, news item by Sean Parnell, `Smokers set to be taxed out of habit'.
The Age: January 4, 2013, page 3, news item by Rachel Wells, `Tobacco shop smokescreen packs face scrutiny'.
The Australian: August 1, 2013, page 1, news item by David Crowe, `Smokers to cough up $5.3bn for budget'.
The Age: August 1, 2013, page 4, news item by Kenny and Martin, `Smokers to carry heavy tax increase'.
The Australian: August 6, 2013, page 12, comment by Judith Sloan, `Poor smokers are an easier target than mining companies'.
The Australian: August 6, 2013, page 6, news item by Sean Parnell, `Quitting "best way the poor can save"'.
The Australian: August 5, 2013, page 14, comment by Jane Rankin-Reid, `Morality lost in cloud of smoke'.
The Age: August 3, 2013, page 6, news item by Tim Colebatch, `Danger: smokes tax causes inflation'.
Herald-Sun: August 2, 2013, page 31, comment by Philip Hudson, `Smokers are fuming but they're an easy target'.
The Australian: August 2, 2013, page 6, comment by Nick Cater, `A numbers game of blowing smoke' .