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Illegal tobacco market set to rise

24 May 2012

Illegal tobacco market set to rise

The use of illicit tobacco is expected to rise in New Zealand following the tobacco excise tax increases announced in today’s Budget.

Spokesperson for Lower Hutt-based cigarette manufacturer, Imperial Tobacco, Brendan Walker, says the primary drivers for illicit trade are consumers saving money and criminals making money. Excise tax increases directly contribute to both of these drivers.

New Zealand’s illegal tobacco market is around three percent of sales, but will grow in the near future, Mr Walker said.

“The government could shoot itself in the foot with this policy decision by creating a lucrative black market for tobacco. This could eventually cause the government to lose revenue if the illicit market gets a foothold here, as it has in Australia.”

The major issue with illicit product is that it is totally unregulated. No one knows what’s in it, who’s made it or who it’s sold to, including children and young people.

Mr Walker said Australia has seen a major increase in the use of counterfeit product after increasing excise taxes on tobacco and bringing in other regulations, like display bans.

“The most recent study from Australia[1] shows smokers have moved from purchasing unbranded tobacco to counterfeit and contraband tobacco.

“This is a worrying trend considering plain packaging is due to be introduced in Australia at the end of this year. Plain packaging will be a counterfeiters dream. It will make it very easy for them to copy tobacco packaging. We are extremely concerned the government is considering introducing plain packaging here, especially after today’s announcement.”

Mr Walker said the industry understands government’s desire to control smoking rates, despite the fact that tobacco industry taxation nets the government over $1.3 billion annually.

“But policy makers must also remember we are a legal company selling a legal, highly regulated product to consenting adults whose right to use our product, of their own free will, should be respected.

[1] Illicit trade of tobacco in Australia: Report for 2011, Deloitte, May 2012

Types of illicit tobacco Definition
Unbranded tobacco Sold as finely cut loose leaf tobacco
May be imported or grown within New Zealand (in New Zealand it is illegal to grow more than 15kg per adult per year (which equates to 40-80 cigarettes per day) for your personal use)
Carries no labelling or health warnings
Consumed in RYO form or inserted into empty cigarette tubes and sold in boxes by tobacco retailers
Commonly known as ‘chop chop’
Counterfeit cigarettes Made from tobacco leaf
Specifically manufactured overseas in countries with large scale tobacco production and sophisticated tobacco manufacturing machinery
Illicitly smuggled into New Zealand most commonly via ports on large container freight and other channels including airmail and online purchases
Carry trademark or branding without the consent of the trademark owner to imitate popular legitimate tobacco product brands
Do not adhere to industry production standards
Pose additional serious health risks
Also known as fake cigarettes
Contraband cigarettes Any cigarettes, counterfeit or genuine, that are sold without the payment of applicable excise taxes
Manufactured legally outside of New Zealand adhering to local regulations and smuggled into the New Zealand market
Carry legitimate trademarks
Avoid government regulations, quarantine inspections and ingredient controls.

ENDS

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