Why the tobacco tax increase on 1 September might be a good thing

Pile of gold coins next to neatly stacked cigarettes

On 1 September 2018, the price of tobacco products – that's cigarettes, cigars and loose tobacco – in Australia will increase by 12.5 per cent.1 If you’re a pack-a-day smoker, this means your daily spend on cigarettes will increase by an average $3 a day.2 Over a year, your spend on cigarettes will increase from an average of $11,151 to $12,545. 2,3*

So, why does this tax increase happen every year? And why might it be a good thing?

What exactly is the tobacco excise tax?

'Excise' is a technical word for a tax that a government applies to goods that are produced and used within their own country.4 When tobacco products are imported into Australia, the same level of tax is applied, but because the products aren't produced in Australia, the tax is called an 'excise equivalent goods' tax – it's basically a customs duty that's applied at the same rate as the excise duty.5

The Australian Government has added an excise to tobacco products since 1901.1  The tax and how it is made-up has varied over the years. Australia is a party to the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC). This means that Australia recognises that tax and price increases on tobacco products are a key measure to reduce the demand for tobacco, especially in young people.1

As part of this convention, the WHO recommends that tobacco excise taxes should make up at least 70 per cent of the retail price of tobacco products.1 To start moving towards this goal, the Australian Government began adding a yearly 12.5 per cent excise tax increase to tobacco products from 1 December 2013.1 This was followed by additional 12.5 per cent increases on 1 September 2014, 2015, 2016 and 2017.1 Then, in the 2017–18 Budget, the government announced that these increases will continue on 1 September 2018, 2019 and 2020.1 From 2017, roll-your-own ('rollies') and other tobacco products like cigars started to be taxed in the same way as manufactured cigarettes.1 Applying the same level of tax to all forms of tobacco is a way to help reduce the motivation for people to substitute cigarettes for cheaper tobacco products and help to reduce tobacco use.6

Why have a tobacco tax?

Tobacco taxes have two main purposes:7

  1. To provide a source of revenue to government to offset some of the costs that cigarette smoking creates for government. The economic burden of tobacco use costs the Australian community around $31.5 billion a year – and most of these are health costs. These costs are much higher than the money raised through the tobacco tax.
  2. To help reduce the affordability of and demand for tobacco products and reduce the negative societal health impacts associated with smoking.

How has the tobacco tax affected smoking rates in Australia?

Rates of smoking in Australia are currently at their lowest levels.7 The 2016 National Drug Strategy Household Survey found that between 1991 and 2016, the amount of Australians (aged 14 years and over) who smoke every day halved from 24 per cent of the population to 12.2 per cent of the population.8 During this period there has also been a 13% increase in the rate of people who have never smoked.8

In 2016, the main reasons that smokers attempted to quit or changed their smoking behavior was because smoking cost too much or they were worried it was affecting their health.8 And for smokers who do not want to quit, 27 per cent still said that increased costs would motivate them to quit in the future.8                                                                                                                             

Tobacco taxes reduce tobacco consumption6,9

The tobacco tax has contributed to the decline in smoking rates in Australia, and research from around the world has now shown that these tax increases on tobacco products can:

  • reduce the amount of time that smokers continue to smoke
  • raise interest in quitting smoking
  • boost the number of quit attempts
  • increase the number of people who successfully quit smoking
  • discourage people from taking up smoking
  • significantly decrease the amount of young people who take up smoking.

Tobacco taxes improve health and reduce health costs6

Worldwide research shows that reduced smoking through tax increases also:

What will you do when the tobacco tax increase hits?      

You can start taking steps to prepare yourself to quit smoking before the next tobacco tax increase on 1 September.

Like many, one of your reasons to quit may be the cost of smoking. When you quit smoking, you not only improve your health but also save money and time which you have likely used up on many smoko breaks.

Now that you have the motivation, you just need the tools to help you quit smoking. This is where your doctor can really help you. You could increase your chance of a successful quit by up to 4x with their help compared to going it alone.10So don't feel that you have to do it alone. Your doctor can provide you with a plan of treatment and on-going support that is suitable for you.

 

 

Footnotes

*Calculations are based on an average cost of $30.55 for a packet of 25 cigarettes as at March 2017. Prices between brands can vary.

 

©Pfizer 2018. Pfizer Australia Pty Limited. Pfizer Medical Information: 1800 675 229. Sydney, Australia. PP-CHM-AUS-0576, 08/2018
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