AACS: MORE TOBACCO TAX IS DISCRIMINATION, PURE AND SIMPLE

NOVEMBER 24, 2015
THE AUSTRALIAN
“$40 a pack: cigarette price rise ‘a tax grab on poorest’ “
“Bill Shorten’s plan to raise $3.8 billion by pushing the price of cigarettes to $40 per packet has been challenged during a closed-door meeting of Labor MPs, amid concerns the plan would hurt the party’s core constituents.”
Plans by the Labor Opposition to meet funding promises by implementing yet another round of tax increases on legal tobacco have been derided for lacking imagination and being blatantly discriminatory by the Australasian Association of Convenience Stores (AACS).
AACS CEO Jeff Rogut called Labor’s plans to increase taxation on tobacco – which is already taxed more in Australia than nearly every other country in the world – as another example of one part of the community being isolated and demonised, simply for using a legal product.
“There is no greater example in the current day and age of lazy, shallow and hypocritical policy than taxing smokers to pay for whatever politicians think will garner votes,” said AACS CEO Jeff Rogut.
“No longer even masking the hypocrisy of their actions, some politicians turn their ire blindly towards smokers, not for a moment considering that these adults already pay more than their fair share of tax, nor that many retailers will be potentially affected as those who choose to smoke are pushed more and more to the black market.
“The pretext that moves like this somehow support health no longer even seem to be a consideration.
“Australia is one of the world’s strongest markets for illicit tobacco because of the way legal tobacco is treated from an excise and regulatory perspective.
“The amount of illegal tobacco that is being sold and consumed in this country has exploded since plain packaging was introduced and as the endless series of tax hikes take a compound effect.
“What politicians have thus far failed to acknowledge is that, with the rise in the illicit tobacco market, the amount of tax revenue that goes uncollected by Government rises too.
“According to the most recent KPMG research, the market for illicit tobacco has grown almost 30% in two years, costing the Government an estimated $1.35 billion in lost tax revenue last year alone.
“Relentless tax increases play directly into criminals’ hands. Meanwhile adult consumers who choose to smoke are demonised more and more.
“And retailers who responsibly sell a legal product bear the financial brunt of lost sales. It is short-sighted policy that must be resisted,” Mr Rogut said.
Summary points to consider:
·      Australia is already a high tax environment for tobacco products, made even more so by the current 4 x 12.5% excise increases (due to end next year). Excise is a key driver of the illicit tobacco market. Excise increases result in higher prices, driving down trading and, ultimately, movement of consumers to the illicit market.
·      Excise is intimately related to illicit trade. Labor policy of increasing excise is only going to accelerate this already existent problem.
·      The most recent KPMG Report on Illicit Tobacco indicates that illicit tobacco in Australia now represents 14.3% of total consumption. This means that roughly one in every 7 cigarettes consumed is illegal. If this 14.3 per cent was consumed in the legitimate market it would represent an estimated $1.42 billion in additional excise revenue for the government.
·       These large excise increases also fuel the black market by making it even more lucrative for organised criminals to smuggle illegal tobacco into Australia. A pack of 20 cigarettes is up to 8 times more expensive in Australia than South Korea, for example. These high profit margins can provide an attractive and valuable source of income for organised crime.
·      In tackling illicit trade, both the supply, and demand, must be targeted. This policy does the opposite, providing an even higher incentive and profit potential to organised crime groups smuggling illicit products.
·      The thing to remember is these groups operate outside the law – they don’t pay duty, they don’t comply with packaging requirements, and they certainly don’t care who their customer is. Children can much more easily get their hands on illicit products.
·       Security issue for retailers – high net worth makes shoplifting and hold ups a more common occurrence
·      We commend the government and those federal and state agencies who have recognised this is a serious issue. It is time for the Labor party to recognise this is a serious issue, too, and not make it worse