The UK government has reversed its position and now apparently intends to introduce plain packaging for cigarettes. At the same time one of the Labor taxes the Abbott government is apparently not going to give us relief from is the increase in the Tobacco Tax, according to LDP Senator-elect, David Leyonhjelm.
The ostensible reason for both is to reduce smoking, but do either of these two measures work?
According to British American Tobacco, all plain packaging laws have done is move smokers down the cost curve so they are buying cheaper cigarettes, in part proving the tobacco industry’s contention that packaging is about changing existing smokers’ preferences, and increased the amount of illegal tobacco on the market.
Worryingly, the cheap price segment which represents the lower end of the legal market has actually grown by 33 per cent since plain packaging was introduced. The cheap price segment now makes up over 22 per cent of the market or nearly three billion cigarettes.
BATA spokesperson Scott McIntyre said that was a huge amount of growth at the bottom end of the market…
“Worse still, the illegal market is now at its highest ever level and is equal to 13.3 per cent of total tobacco consumption. The latest illegal tobacco report by KPMG LLP highlights that the number of illegal cigarettes sold in Australia in the last 12 months has grown 154 per cent.”
Significantly the release leaves out the size of the overall market. There is a lot of difference between “more people than ever [are buying] cheaper smokes,” and more people than ever are buying smokes.
No doubt someone will fill in this gap during the day, but it does look like the policy has had some foreseeable adverse consequences for the government and manufacturers. Although, without having to pay for marketing and branding, its possible tobacco company profits could be higher than otherwise.
Increasing the price of tobacco is another issue. Australia has one of the best performers in the world in terms of percentage of the population that smokes, and we’ve achieved this more through social than economic levers.
Like gambling, smoking has become a cash cow for governments at the same time as they mouth moralistic platitudes about the evils of each.
I can understand that Abbott needs the extra revenue, but he’d gain significant goodwill and kudos from working class Australians if he reversed this Labor policy.
The only Australians still smoking are those who are hooked, or too young and reckless to be worried about it. It’s hard to see an ethical reason for punitively taxing them.