Cigarette packets to cost more than $20 as smokers hit with $5.3 billion in extra taxes

Steven Scott National
August 01, 2013
The Courier-Mail

The Government’s plan will push the average price of a packet of cigarettes to well over $20.

SMOKERS will be hit with $5.3 billion in extra taxes over the next four years as the Rudd Government tries to fill a growing Budget blackhole.

Average cigarette packets will be pushed well over $20 under the plan the Government says is aimed at cutting smoking rates.

But Labor will only spend a portion of the money raised on cancer treatments, despite portraying the hike as a public health initiative.

Under the plan, tobacco excise will rise by 12.5 per cent a year from December 1 this year, with further increases on September 1 in following three years.

A packet of 20 Winfield Blue cigarettes will rise by 98c this year and will cost $5.25 more by the end of 2016, according to government modelling. The increase is on top of regular indexation rises.

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When he was last Prime Minister, Kevin Rudd hiked tobacco excise by 25 per cent in April 2010, in a move that health experts say lead to an 11 per cent drop in smoking rates. At the time, the increase was directed into the health budget.

But this time, Treasurer Chris Bowen would only commit to spend some of the money on tobacco-related diseases.

“This increase in excise serves several purposes: it provides funds for cancer-related health services; it deters young people from taking up smoking; and of course, it alleviates some of the revenue impacts on the Budget,” he said.

The government will already spend $226.4 million this financial year on cancer treatments, according to Budget papers.

Mr Bowen will announce the tax hike as part of a mini-Budget that is expected to contain other hits on businesses and families to help the government make up a collapse in tax revenue.

The government will also detail the costs of its plan to send asylum seekers to Papua New Guinea and how it will pay for this.

Opposition Leader Tony Abbott predicted the government would raise more taxes to fill the hole in its coffers.

“It can’t control its own spending, therefore it always looks to increase taxes on the Australian people,” Mr Abbott said.

The tax hike on smokers has also heightened calls from health experts for a flat tax on alcohol, which could see the cost of wine increase.

A volumetric alcohol tax was proposed by the tax review headed by former Treasury boss Ken Henry and was considered by the government before the Budget this year.

Mr Rudd set the ground for the tobacco tax hike yesterday by announcing $19.5 million for cancer research. The PM said tobacco-related diseases cost Australia about $31.5 billion a year and cause 15,000 deaths in the country a year.

“Treating cancer and smoking-related cancers costs the Australian taxpayer hundreds of millions of dollars each year and frankly these are funds which we have to raise from the taxpayer,” Mr Rudd said.

Cancer Council chief Ian Olver backed the idea of tax hikes on both tobacco and alcohol.

“Discouraging tobacco use by increasing the excise is particularly effective among people on lower incomes, who bear the brunt of tobacco disease burden in Australia, and young people,” Professor Olver said.

“A typical pack of cigarettes costs less than going to a movie. The government needs to make dangerous, addictive tobacco products less affordable for vulnerable Australians.”