Tobacco control measures

February 12th, 2016 at 2:00 pm by David Farrar

Stuff reports:

Increasing tobacco taxes by as much as 50 per cent a year could form the “backbone” of efforts to make New Zealand smoke-free, politicians have been told.

Tobacco taxes increased by 10 per cent at the start of the year, and academics and anti-smoking groups have encouraged Parliament’s finance and expenditure select committee to support a bigger price hike.

Otago University public health professor Nick Wilson, who has studied the best-value methods for reducing the impact of smoking, said politicians were “on extremely strong scientific ground” when raising taxes on tobacco.

“It’s one of the most powerful things that can be done to improve the health of the population … tax can be the backbone of the strategy.”

My personal view is that increasing the excise tax is a sensible measure to reduce smoking. However this should not be done to increase the overall level of taxation, so any increase in excise taxes should be compensated by reducing income tax rates or increasing thresholds.

There is a point at which increasing the price will lead to significant growth in the black market, as has been seen in many countries. I’m not sure at what point this becomes a bigger issue, but policy makers need to be aware of this.

Wilson said the issue of e-cigarettes, which are not currently approved for smoking cessation in New Zealand, was “a very complex area” due to the amount of new studies coming out every week.

It would be best to control their use through pharmacies until their benefits and dangers were fully known, he said.

So you can buy tobacco from the dairy but e-cigarettes only from a pharmacy? Not sensible.

National Maori Tobacco Control Leadership Service kaiwhakahaere Zoe Hawke said tax increases were a “foundation policy” that anti-tobacco organisations could use to improve quitting rates. …

“We need to remove nicotine from the products out there and do some transitional moves to help people move away from it, and e-cigarettes could potentially be something that will help with that too.”

Good to see an open mind there.

T&T Consulting director Sue Taylor said the smoking health programmes already in place were not doing enough to help people quit, and a significant price increase would make a big difference.

Taylor said tobacco taxes should be increased by 50 per cent this year, followed by 25 per cent each year until 2020.

I suspect that level of increase would see more move to the black market. The 10% increase per year has worked well to date.

She did not support e-cigarettes as they “normalised” smoking, and was also concerned that the majority of e-cigarettes were produced by tobacco manufacturers.

“They’re still trying to double-dip everywhere, they’re still trying to introduce other ways of continuing to have the population addicted to nicotine, so we seriously need to think about how we’re going to tax those as well.”

This statement is a tell-tale sign that the motivation of the person is to damage companies they don’t like, rather than just focus on harm reduction. It’s like the anti alcohol crusaders who attack “Big Alcohol” but say craft beers are fine.

Health New Zealand smoking policy researcher Murray Laugesen supported a tax increase, and said the Government should look at legalising the use of e-cigarettes.

“They’ve killed nobody so far, against 4000 deaths [a year] from ordinary cigarettes.”

A startling statistic.

The problem if you tax something too much

December 27th, 2015 at 7:00 am by David Farrar

I support an excise tax on tobacco, for two reasons. One is to cover the costs to taxpayers of health costs of smokers.  Unless we ban smokers from the public health system, then that is economically sensible.

I also think increasing the price does help people stop smoking, and most smokers do want to stop – it is highly addictive.

However there comes a point at which putting the tax up so much causes unintended consequences, such as increasing black market sales. And while minor in NZ at this stage, black market sales of tobacco actually has been found by the Centre for Analysis of Terrorism to be a significant funder of some terrorist groups.

A story in the Guardian notes:

So how can governments cut off terrorists’ cash flows? Illicit markets and petty crime flourish in the poor neighbourhoods of Paris and Brussels. In Paris, several northern neighbourhoods close to where some of the November attacks occurred have large-scale markets where illicit products are sold, yet French police choose not to prioritise such small-scale crimes. Indicative of this is that France, according to recent KPMG research, is No 1 in Europe in the illicit cigarette trade, with 9bn counterfeit and contraband cigarettes imported in 2014, placing France far ahead of Germany and UK in both actual and per-capita imports. …

A terrorist involved in the attack on Charlie Hebdo had traded in counterfeit trainers and cigarettes. Amedy Coulibaly, who slaughtered people at the kosher supermarket, had an extensive violent criminal record, and the thwarted attacker of the Thalys train was a long-term small-scale drug trafficker.

And it is not just in France. The KPMG report found the following groups were profiting from the black market in tobacco:

  • Hezbollah (but operating in North Carolina)
  • Al-Qaida
  • ETA
  • Islamic State
  • IRA

If you ban a product, or tax it too highly, the incentives grow for the black market. Has been that way for thousands of years.

Herald on plain packaging

April 28th, 2012 at 11:15 am by David Farrar

The NZ Herald editorial:

The Government has been persuaded to follow Australia’s decision requiring cigarettes to be sold in plain packs.

The theory seems to be that if all brands are forced into the same style of packet – perhaps a dirty light brown, dominated by health alerts and grisly pictures, the manufacturer identified in small type of a standard font – smoking will lose much of its remaining appeal. This must be the insult to trump them all.

Tobacco companies maintain plain packs will do nothing to reduce smoking and it is hard to disagree. Their business is not one of those that has to compete on artificial brand distinctions with a necessarily identical product. Smokers discern different blends and so long as they can find their preferred brand they are unlikely to care about the packet.

Social science claims to have found that cigarette packaging has some effect on younger people.

A recently published paper was based on group discussions and interviews with young smokers and non-smokers when they were shown plain white packs with prominent health warnings. They offered observations such as: “It looks so boring”, “it’s just budget … it’s like, lame”. Research of that sort insults everyone’s intelligence.

I’ve blogged on this myself. The research is far far from convincing.

Plain packs seem unlikely to bring the anti-smoking campaign much closer to its goal of a smokefree New Zealand by 2025. That goal, endorsed by the Government, could require much more drastic steps, especially in taxation.

A working paper produced in the Ministry of Health is said to suggest raising the cost of cigarettes to $100 a pack in order to reach the target.

The Maori Party seems particularly determined on the issue. With 44 per cent of Maori still smoking, more than twice the proportion overall, the party makes no apology for tax increases that hit the poor hardest.

A 12 per cent excise increase in 2010 is reckoned to have lowered tobacco sales by 10 per cent over the following year. Price is clearly the weapon that works, the only feature of a cigarette packet that counts.

If the cost needs to reach $100 a pack, and they are currently around $20, then they need to go up $80 a pack over 13 years, so an increase of around $5/year.

Crampton on smoking costs

November 7th, 2010 at 9:53 am by David Farrar

The Press publishes this very useful article from Eric Crampton:

You could be forgiven for thinking that the health system could save $1.9 billion if tobacco had never existed. That’s what the Ministry of Health says smoking costs the public health system.

But, you’d be wrong.

The ministry’s latest estimate of the cost of smoking has nothing to do with the costs that smokers impose on taxpayers or the costs that could be avoided if smoking were to disappear.

Rather, it’s a politically convenient number whose promotion has much to do with gaining voter support for anti-tobacco initiatives and nothing to do with real economic costs.

I was pretty surprised when this figure started being cited earlier this year. It was much higher than the previous estimate of $350 million dollars – a figure produced not by the Big Tobacco lobby but rather by Des O’Dea in a report commissioned by anti-tobacco crusaders Action on Smoking and Health.

So the costs have gone from $350, to $1.9b – how did they achieve this?

After sorting the population by age, gender, income, ethnicity and smoking status, they then compared the costs of providing health services to smokers as compared to nonsmokers for each group.

The excess costs of the smoking group were tallied up to produce the $1.9b figure.

So what’s the problem?

It’s easiest to think of smoking as bringing forward a whole lot of end-of-life costs.

Smokers die earlier than nonsmokers.

We know that.

And the costs to the health budget of somebody who is dying are rather higher than the costs of somebody who is healthy.

But everybody dies sometime and most of us will incur end-of-life costs that will be paid for by the public health system.

Suppose that a smoker will die at age 65 and a nonsmoker will die at 75. Comparing 65-year-old smokers to 65-year-old nonsmokers and calling the difference the cost of smoking then rather biases upwards the measured costs of smoking.

We ought to be comparing the health costs of a smoker dying at age 65 with the health costs of a nonsmoker dying at age 75.

Yes. This is what I assumed was done. But obviously it did not produce a big enough figure.

The figures assume that in the absence of smoking, smokers would never have imposed end-of-life costs on the health system. But for their smoking, all smokers in this scenario would have died of a sudden, and cheap, heart attack and would only have had average health costs up to that point. That’s clearly nonsense, but the $1.9b figure only makes sense if it’s true.

So the $1.9b is a useless figure. Sadly I doubt it will stop people citing it.

If smoking disappeared tomorrow, your taxes would have to go up to make up the difference. Thank the next smoker you meet for helping to keep your taxes down.

And be as sceptical of numbers coming from the Ministry of Health as you would be of numbers produced by the tobacco industry. Neither is a disinterested party.


House in Extraordinary Urgency

April 28th, 2010 at 5:27 pm by David Farrar

The House has just gone into extraordinary urgency. This type of urgency is so rare, it needs the permission of the Speaker under Standing Order 56(3) . He must be convinced “that the business to be taken justifies it”.

Normal urgency only has the House sit until midnight (and only from the day after it is moved). Extraordinary urgency has the House sit until the law has been passed – even throughout the night.

Normally this is granted only for stuff like excise tax increases, and indeed it is for that – an increase in tobacco excise tax. Normally this is done at budget time, but it doesn’t have to be.

The bill calls for tobacco excise to be increased in three steps over two years.  It is proposed that the excise on cigarettes will rise immediately by 10% with a further 10% increase next January and a third increase of 10% in January 2012.

Also proposed is a 24% increase in the excise tax on loose tobacco followed by the same 10% increases in 2011 and 2012 as for cigarettes.

“We know that putting up the price is a powerful tool to reduce smoking.  It forces people to cut back, but more importantly it provides a strong incentive for smokers to quit and helps dissuade young people from ever starting to smoke.”

“This represents a huge investment in the future of our country.   Helping smokers to quit is a priority of this Government and one of our health targets,”

I guess this helps explain why they so quickly ruled out increasing the alcohol excise tax.

Harawira on Agenda

September 22nd, 2008 at 7:59 am by David Farrar

Agenda hve the transcript up of their interview with Mairo Party MP Hone Harawira. First the good parts:

HONE Oh sure, I mean they have, to assume that they can simply sit there and pass an Electoral Finance Act when the whole world was saying this sucks and in fact it’s come back to bite them on the bum shows how disconnected they were with reality to try and ram through legislation at this late stage in the game is arrogant, it suggests that they are really only – and then to stack all of these quangos with their cronies suggests that they see themselves going out and they’re really just trying to maintain as much power as possible, that’s arrogant, that’s nothing to do with coalition building, and in fact the Labour Party has yet to come out clearly and say these are the sorts of things we’d like to do with the Maori Party.

Harawira is of course right with his analysis.

GUYON What about National then are you comfortable, could you actually work with National?

HONE Another difficult one there, but no more difficult than working with Labour as far as we’re concerned. People have this big fear of National and Maori in terms of oh they’d get rid of the Maori seats wouldn’t they, but my response constantly is always the greatest land theft of my generation has actually been the Foreshore and Seabed and that wasn’t stolen by National that was stolen by Labour, would you expect us to jump into bed with them happily.

That is a very different tune to a few years ago.

But some idea of the challenges ahead:

GUYON Let’s talk about a couple of the things that you said you want to do if you have influence over a government, you wrote recently in the Northland Age that you want to remove GST from food and abolish tax for people earning $25,000 and under, how much would that cost?

HONE Actually Guyon I couldn’t care less how much that costs, what I do know is this.

Guyon says Treasury worked the cost out for them:

GUYON Well we did something that you should have done, we asked Treasury how much this would cost, they said it would cost two billion to remove GST from food and three billion more to cut taxes for those earning less than $25,000. You want free health care for kaumatua and kuia too, where is the money coming from?

I have a figure of $2.4 billion for removing GST from food. The no tax on those earning less than $25,000 could be even more than $3 billion. That is the cost of zero tax for everyone who earns $25K or less. But if you read it as being zero tax on the first $25,000 of income (which you would need to do otherwise someone at $25k pays $0 and someone on $26K pays pays says $5k) then the fiscal cost is arouynd $11.4 billion (according to NZIER calculator).

HONE Well let’s say the tax off cigarettes for the last we’ll say five years, that’s five billion dollars. This isn’t very hard eh, this isn’t rocket science, the government is taking a billion dollars a year off tobacco tax, they could certainly spend it in this area.

Hone is correct that tobacco excise tax is around $1 billion a year. But that tax is already budgeted for.

Even if Hone was suggesting we double the excise tax on tobacco, that would bring in an additional billion a year at most. Probably quite a bit less as the amount of tobacco purchased would decline. But even if it was $1 billion that is not even close to the $5 billion to $13 billion cost of what he wants to do.