The Turnbull Government’s decision to increase the excise on tobacco by 12.5% p.a. over four years in the 2016-17 budget – that’s a whopping 50% increase – generated little adverse criticism from the political commentariat.
That’s not surprising. The increase is also supported by Labor and the Greens; we’ve just completed four years of 12.5% p.a. increases in the tobacco excise (see exhibit); it provides a convenient source of revenue; and of course smoking is bad for individuals and bad for public health policy.
Smoking imposes a huge cost on Australia’s health system. It’s estimated to kill 15,000 people each year and costs an estimated $13.5 billion p.a. in health and economic costs. It’s also true smoking has declined significantly over the last 25 years in response to active state interventions including huge tax increases.
But the increase can also be seen as a harsh and callous act of public policy devised by righteous elites who are oblivious to – or simply don’t care about – the wellbeing of those who will be paying around $0.81 in excise per cigarette by 2020.
The level of tax on tobacco has already gone up 343% over the last 20 years. A pack of 25 cigarettes now costs around $23 to $25 and each cigarette currently attracts $0.54 in excise. Smokers already pay more tax on each cigarette than they do for a litre of petrol!
The latest increase is widely expected to raise the price of cigarettes to $40 a packet by 2020 i.e. $1.60 per cigarette. I’d estimate it’s more likely to be $30-35 a packet but that’s still extraordinarily costly.
While I accept that price is a deterrent to smoking – and has a lot to do with the historic and continuing decline – there’s something grotesque about imposing such a brutally high level of tax on what is an addictive drug.
It’s also highly regressive. According to figures published by the Department of Health:
- People 14 years or older living in areas with the lowest socioeconomic status were 3 times more likely to smoke daily than people with the highest SES…
- People aged 14 years or older, who were unemployed, were 1.7 times more likely to smoke daily and those who were unable to work were 2.4 times more likely to smoke daily…
- The proportion of Aboriginal and Torres Strait Islander people aged 15 years and over who were daily smokers was 38.9% in 2014-15…
This strikes me as an exemplary case of political and policy elites who are almost entirely disassociated from the plight of those who suffer the consequences of their policy prescriptions.
Yes, smoking is falling – 16.1% of adults smoked in 2010-11 compared to 14.7% in 2014-15 – but it’s taking cruel and unusual levels of taxation to maintain the momentum. The disincentive effect of pricing is getting weaker as the habit is increasingly concentrated among hard-core smokers.
Yes, smoking is bad for “them”. Yet despite the current punishing level of excise, around 2.6 million Australians still smoked every day in 2014-15. The number isn’t falling because rational consumers are deterred by the higher price and so choose to spend their personal budget in other ways. It’s falling because of the ‘income effect’; the excise is making smokers so poor they simply don’t have the funds anymore to buy as many cigarettes.
In 2020, someone who smokes 20 cigarettes a day – the standard “pack a day” habit – will be forking out around $110 per week in excise from their post-tax income. And despite the increase, there will still be at least two million adults who smoke every day. Most of them will be those who can least afford the crippling tax.
Enough is enough. Parliamentarians who profess compassion and a progressive agenda need to look at stopping the endless hike in tobacco excise. Saving “them” from themselves and saving the health budget are legitimate policy goals, but the reliance on taxation as a disincentive has descended into heartlessness.
It’s time to use other ways to encourage smokers to quit the habit. And if there isn’t a silver bullet – and I suspect there isn’t except, perhaps, for prohibition – then policy-makers need to accept that reality and resist the pressure to keep jacking up the tobacco excise.
The current public discussion around the sections of society who feel disenfranchised rightly focuses mainly on economic issues. But it’s more than that; there’s also a disconnect between the motivations of elites who make policy, on the one hand, and the wellbeing and autonomy of those whose lives are supposedly being improved, on the other.
And it’s not just smoking. Cities policy has it’s quota of elite opinion that’s focussed on policies and prescriptions offering much more for elites than for the great mass of urban Australians.