Labor would slug smokers to boost revenue, improve health

Labor is presenting its proposal to increase tax on cigarettes as an aid to the health of Australians and a boost to government revenue. 55Laney69/Flickr, CC BY-SA

A Shorten government would further substantially increase the excise on tobacco, taking the price of a packet of 25 cigarettes to nearly A$41 by 2020 and boosting revenue by $47.7 billion over a decade.

Under the plan, leaked earlier and announced on Tuesday, excise would rise by 12.5% on September 1, 2017, and then by the same percentage on September 1 in each of the following three years.

On current policy settings, a 25-cigarette pack that currently costs $24.69 will increase to $29.91 in 2020. Under Labor’s policy it would cost $40.80.

The opposition is presenting its initiative as one that helps health as well as raising money, and contrasting it with the Coalition’s possible changes to the GST which would drive up prices generally.

Opposition Leader Bill Shorten said some 2.5 million Australians smoked every day. “I want to stop young people taking up smoking and I want more people to quit smoking. The difference between Labor and the Liberals could not be starker. Labor wants to reduce the number of people who smoke. Malcolm Turnbull’s Liberals want to increase the GST and the cost of everything, including fresh food, school fees and going to the doctor.”

The extra revenue would be $3.8 billion over the current forward estimates and $47.7 billion over the medium term of a decade. The costing has been done by the Parliamentary Budget Office and takes into account the discouragement effect on smoking that higher prices would have.

In 2014-15 some $8.3 billion was collected in tobacco excise.

While the proposal would be unpopular with smokers, the health damage done by tobacco makes it harder for the Coalition to mount a credible all-out attack on it.

Shadow Treasurer Chris Bowen and health spokeswoman Catherine King said in a statement that, once fully implemented, Labor’s policy would bring Australia into line with 33 other countries including the UK, France and New Zealand in ensuring that at least 75% of the overall cost of a pack of cigarettes comes from taxation.

King said that each year in Australia tobacco killed more than 15,000 people and caused more than $31.5 billion in health and economic costs. “We should be using the tax system for reform with purpose, reforms that will see more people give up smoking, and more kids never start.”

“The World Health Organisation considers that raising tobacco taxes to more than 75% of the retail price for tobacco products is amongst the most effective and cost-effective tobacco control interventions,” she said.

Bowen said that Labor was being upfront in saying more revenue was needed to get back to budget balance and fund important productivity-enhancing investments in our schools and hospitals.

King said that tobacco consumption had fallen 16.8% in the almost three years since the ALP’s plain packaging laws came into effect. Daily smoking declined between 2010 and 2014 from 15.1% to 12.8%, according to the latest National Drug Strategy Household Survey.

Labor in government introduced four 12.5% excise increments taking effect from December 1, 2013. The third rise was in September this year and the final one comes next September. But “while the excise and taxation contribution to cigarette costs have increased following Labor’s tobacco excise measures in office, they remain well below other comparable nations”, the opposition said.

Postscript

The latest Newspoll in Tuesday’s Australian contains more bad news for Shorten, with Malcolm Turnbull widening his lead as better prime minister to a huge 49 points. Turnbull’s better prime minister rating increased from 61% to 64%, while Shorten fell from 18% to 15%.

Satisfaction with Shorten’s performance declined a point to 26%. Turnbull’s satisfaction level rose from 56% to 60%, in the wake of his first major overseas trip during which he attended three summits.

The Coalition retained its two-party lead of 53-47% of a fortnight ago. The Coalition’s primary vote stayed on 46%; Labor’s vote was down a point to 33%. The Greens rose a point to 11%.

Shorten’s 15% support as better PM is the lowest for any Labor leader since Simon Crean was on 14% in November 2003, just before he stood down as opposition leader.

If the poll result was replicated in an election, Labor would suffer a defeat of a similar magnitude to 2013.