*Embargoed for 1:15pm today (time of delivery, media welcome)*
Speech to ACT members and supporters
Spencer on Byron, 9-17 Byron Ave, Takapuna
TL;DR: ACT SAYS THE GOVERNMENT SHOULD REBATE TOBACCO SELLERS WITH A PORTION OF TOBACCO TAX REVENUE TO COVER SECURITY COSTS
Tobacco Tax
Today I’d like to talk about a problem that is among the most urgent our country faces. It is an epidemic of violent robberies involving baseball bats, knives, and guns that is caused by a tobacco tax that has turned bricks of cigarettes into gold bars.
Since 2010, the Government has more than doubled taxes on tobacco with ten per cent year on year tax increases. A brick of cigarettes weighs next to nothing, is worth almost $300, and has a ready black market for thieves to sell into.
As I wrote in a January 2016 edition of Free Thoughts
tobacco taxes have taken significant amounts of money from those who can least afford it, and for little benefit. Like all policies that do more harm than good, annual increases on tobacco tax should be stopped.
The facts are that doubling tobacco taxes has taken an extra $700 million dollars a year out of the poorest households in New Zealand. In the Epsom Electorate, the wealthiest in the country, only five per cent smoke. Maori and the poor are three times more likely to smoke than Pakeha and the wealthy.
For children unlucky enough to be born into a poor household where adults smoke, the average $28 per week increase in tobacco tax more than wipes out the much touted $25 increase in benefits.
Upon announcing another four years of 10 per cent increases with budget 2016, then Minister Sam Lotu-iiga said: “Raising the price of tobacco is the single most powerful tool to reduce smoking. All smokers will face the price rises. The more they smoke, the more they pay. The more they pay, the greater the incentive to quit.” Talk about alternative facts!
There has been almost no impact on smoking rates – that’s why the amount of tax collected has gone up. In the five years prior to the rolling tax increases, smoking rates went from 18.3 per cent down to 16.3 per cent. In the five years after the increases started, the rate of reduction slowed. The lasted Ministry of Health figures show a rate of 15.0 per cent.
If the ACT Party announced a policy to double taxes on the poorest New Zealanders, there would be outrage. But with this policy the Maori Party has done exactly that, and successive finance ministers have laughed at us all the way to the bank.
Budget figures forecast an additional $237 million in tobacco tax revenue by 2020. With a whopping $1.857 billion on tobacco tax revenue expected that year. The Government does not expect the policy to work, they know people will keep smoking, they’re even counting on the revenue.
ACT opposes social engineering. We believe in user pays. Smokers should pay their fair share of extra costs imposed on the taxpayer by their habit. However, that level of tax is likely very low, for three reasons:
• People who die earlier claim less in superannuation
• All people die of something, and end of life costs are high for a range of conditions
• People who die earlier require less aged care support
Whatever the fair level of tobacco tax, it is much lower than what we have now. As Minister Lotu-liga proudly admitted, the tax increases of the past seven years have not been designed to recover costs, but to punish and deter.
The realpolitik of the situation is that ACT cannot prevent the increases in this parliament. As with the disastrous RMA reforms, the National Party and the Maori Party have the numbers to pass this legislation alone. The National Party want the money, and it is a flagship policy of the Maori Party.
That is just another reason why a stronger ACT is needed in the next parliament.
The New Front Line in the War on Drugs
The tobacco tax increases are not just a bad policy, they are dangerous. Dangerous, that is to the countless victims traumatized by what is now a vast criminal enterprise knocking over dairy owners and service station workers to sell on a black market.
Here are a selection of recent headlines:
• Hawke's Bay stores robbed for tobacco 'every three days.' May 2nd, Hawkes Bay Today.
• Thirsty liquor aggravated robbery victim: 'I'm mentally traumatised' May 7th, New Zealand Herald
• Rifle used in Dunedin dairy robbery May 2nd Otago Daily Times
• Police seeking 'cowards' in knifepoint robbery Newshub, May 18th
• Police release footage of violent Mangere robbery New Zealand Herald, May 18th
• Dairy owners 'constantly live in fear' Radio New Zealand, March 24th
• Dairy robbers 'have no fear of police' Radio New Zealand March 17th
• Tobacco targets: Another robbery for black market smokes New Zealand Herald August 11th
• Northlanders suffer continuing trauma from tobacco robbers Northern Advocate, May 1st
• Footage shows axe-wielding man demanding smokes from dairy owner Christchurch Press August 30th
I could go on, that is just the result of googling ‘tobacco robbery news.’ Every one of those reports was about a tobacco theft.
It is a crisis. It is only a matter of time before somebody is killed. In the words of the Christchurch Press editorial: “Dairy owners and their employees, earning the minimum wage or close to it, are now on the frontline of what is essentially a drugs war.”
We don’t even know the size of the problem. Always trying to be helpful, ACT has suggested the police start recording statistics on the number of tobacco motivated thefts. They have not responded, seeming to prefer denial.
Christchurch police have said: "we do the best we can with what we've got".
Some dairy owners are reportedly turning to gangs for protection. We risk becoming the Sicily of the South Pacific.
The problem is that no political party is responding to this crisis.
National Minister Nicky Wagner recently said dairy owners should just stop selling tobacco, as if they are just putting themselves in danger for fun. That is out of touch, and out of sync with the Government’s own revenue projections, too.
As the Christchurch police have suggested, extra police will help. ACT supports the Government’s announcement of 880 more police by 2020, but that is too far away for people being beaten up now. The police will just have to keep doing “the best with what they’ve got.”
The Crime Prevention Group, a group of Auckland retailers, wants greater rights to self-defence. That is understandable, but risks an arms race where the crimes become even more violent than they already are.
A Simple Solution
If we accept that the tobacco tax increases of the next three years are locked in, then retailers should be able to apply for that additional revenue as a rebate. They are being asked to collect taxes of almost $2 billion a year, but they are not getting protection from the dangers that collecting tobacco tax brings.
Some larger chain retailers have begun to install German made dispensers that foil robberies by allowing only one packet to be dispensed at a time, after payment is made. They cost $30,000, a prohibitive amount for most mum and dad operations. Others have begun hiring extra security, fitting out bars and panic rooms.
There are an estimated 8,000 retailers selling an estimated 110 million packets of cigarettes per year, or 38 per retailer per day.
The tax on a pack of 20 cigarettes is currently $14.76. Next year it will rise to by $1.47 to $16.23, then by $1.62 to $17.86 in 2019, then by $1.79 to $19.65 in 2020. ACT proposes that each year, a retailer can apply for the latest increase as a rebate. An average retailer selling 38 packs a day would get to keep $20,476 in 2018, $22,523 in 2019, and $24,776 in 2020, a total of $67,775 over three years.
The policy is simple to administer, and would allow retailers to invest in technology and security that would make their jobs safer.
No doubt there will be many criticisms from all the usual suspects. ACT does not believe in complicating the tax system. No we don’t. However using taxes as a punitive measure is already a massive distortion in the tax system. We would much rather stop it all together, but for now we cannot. If our preferred policy cannot be implemented, we will promote the next best thing. We are simply keeping those forced to collect it safe.
No doubt the anti-tobacco lobby, unable to show empathy for anything other than their obsessive cause, will baulk at doing any favours for people who sell tobacco. Frankly, I find their lack of empathy for people put in serious harm disgusting.
No doubt people will ask if ACT has been somehow put up to this by the pro tobacco lobby. ACT has not received a cent from them in the time I’ve been leader, and I’m not aware it ever did before, either.
I am motivated by attending a meeting organised by the Crime Prevention Group two weekends ago, and seeing the impact of the violent tobacco robbery on honest businesspeople selling a legal product that is essential to their livelihood for the foreseeable future.
I now challenge my parliamentary colleagues, particularly our Minister of Finance who has the power to make this policy happen, to explain their objections.
Do they not think the problem is real? Are they not worried that somebody is going to be killed in a violent tobacco robbery, perhaps not this week, perhaps not this month, but soon enough?
Do they have a better idea that could solve this urgent problem?
Why shouldn’t retailers who collected $1.62 billion of revenue, or approximately $200,000 per store last year not be able to keep the extra ten per cent, or $20,000 the Government will make them collect next year to keep themselves safe?

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