The Federal Government is reportedly considering following Labor’s policy footsteps by increasing the tobacco excise, which could see the price of a packet of cigarettes increase to as much as $40.

In November Labor announced its plans to extend the tobacco excise if elected this year. Under the current policy, the last of four 12.5 per cent tax increases, first implemented in December 2013, will occur in September 2016. Under a Labor Government, the proposed extension would see these increases continue until 2020, with estimates suggesting a packet of 25 cigarettes could cost more than $40 by the end of the decade.

Labor said at the time that the increases outlined in the policy proposal were in line with countries such as New Zealand, the UK and France, where smokers contribute more than 75 per cent of the retail price of cigarettes to tax. Australia’s current tax contribution, taking into account the already legislated excise increases, is 63 per cent, well below the World Health Organisation’s (WHO) recommendation of 75 per cent, which is currently levied by the aforementioned countries as well as 33 others.

Retailers to bear the brunt of tax increase: AACS

Jeff Rogut CEO of the Australasian Association of Convenience Stores (AACS) said raising the cost of a packet of cigarettes to $40 would be especially concerning given the massive spike in the illicit tobacco market that he says has been driven by policies such as excise hikes and plain packaging.

“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,” Mr Rogut said.

“The government itself has acknowledged the dangers of illegal tobacco, recently convening a senate inquiry to address the issue. It makes no sense to undertake an inquiry to tackle the illicit market on one hand, then introduce more tax increases to legal tobacco – directly boosting the illicit market – on the other.

“The AACS urges common sense to prevail. Adults who choose to smoke a legal product already pay an enormous amount of tax to the government, but 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 per cent in two years, costing the government an estimated $1.35 billion in lost tax revenue last year.

“Relentless tax increases play directly into criminals’ hands while adult consumers who choose to smoke are demonised more and more,” Mr Rogut said.

“Retailers who responsibly sell a legal product bear the financial brunt of lost sales. It is short-sighted policy that must be resisted.”

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