Republished with Permission
Author: Bryce Edwards
For the first time ever, New Zealand has just reduced taxes on tobacco products – in this case a 50 per cent reduction in the health taxes on “heated tobacco products”.
The move came in very quietly at the start of the month and is officially being explained by Associate Health Minister Casey Costello as an attempt to help smokers use these products to get off cigarettes. But there’s strong reasons to doubt this.
Excise tax halved on heated tobacco products
The news was broken yesterday by RNZ’s Guyon Espiner, who has been playing a strong role as a watchdog on the new Government’s changes to smoking and tobacco policies. He observed that although the Government had not announced any tobacco tax changes, the government Customs website showed that Heated Tobacco Products (HTPs) were now subject to only half the excise tax they used to have on them.
Espiner attempted to get an interview with the Casey Costello – who is both the Minister for Customs and the Associate Minister for Health responsible for tobacco – but was denied his request. Instead, the Minister put out a statement saying that the tax change was an experiment to see if lowering the price of HTPs meant they could be an effective tool to help smokers quit cigarettes.
Costello elaborated: “Vaping does not work for everyone and some attempting to quit have tried several times. HTPs have a similar risk profile to vapes and they are currently legally available, so we are testing what impact halving excise on those products makes.”
The Minister was then confronted on the issue by a journalist yesterday when she was speaking at a Police conference, and she reiterated that the tax reduction on HTPs was a “trial” rather than an intended permanent change: “It’s part of the strategy around targeting those who are addicted smokers and to provide alternate products… it’s a less harmful solution.”
The HTPs are similar to vapes, but instead of heating liquid containing nicotine, the devices heat tobacco powder to create a vapour. They are separate again from “nicotine pouches” which the government has also been considering to promote
Ministry of Health opposed the tax cut; tobacco companies lobbied for it
RNZ’s Espiner also points to documents from the Ministry of Health in which officials advised against reducing the taxes on HTPs nor promoting their use. According to the papers, Costello requested advice on the HTP issue, but the Ministry responded negatively to the idea: “There is no evidence to support their use as a quit smoking tool… We do not recommend liberalising the way HTPs are promoted. This would likely compound existing concerns about youth uptake and addiction to nicotine products.”
However, the tobacco companies have been lobbying for a reduction in taxes on HTPs. Espiner reports that tobacco giant Philip Morris submitted to the 2018 Tax Working Group that recommended that the government “establish a tax rate for heated tobacco products significantly below the tax rate” for tobacco. He reports that the company now “owns a leading brand in the HTP market, the IQOS”.
In The Post today, journalist Brett Kerr-Laurie reports on research that shows tobacco companies want to encourage “poly-usage”, in which consumers get nicotine from multiple products, but were especially keen to build sales of HTPs: “British American Tobacco generated 2.5 times more revenue from people who solely used HTP, compared to those who only used vapes, five researchers found in 2020. Further investor information suggested tobacco companies wanted customers to use multiple products, and would try attract new users.”
The article also quotes Janet Hoek, a Professor of Public Health at the University of Otago, as saying that the HTP tax reduction suited tobacco industry interests: “The only group that will benefit from this poorly thought-through decision is tobacco companies.”
Similarly, the Medical Director of the Asthma and Respiratory Foundation NZ, Bob Hancox, told the journalist that the Minister “is giving big tobacco what they want, at the expense of our youth's health.” He labelled this “reckless and irresponsible.” Professor Chris Bullen of the University of Auckland expressed that he was “flabbergasted” by the decision and warned that it was “playing with fire.”
Tobacco tax cuts condemned
The Public Health Communications Centre has also released a briefing today that draws attention to how Costello’s statements supporting products like HTPs mirror those of British American Tobacco in their submissions to the government. They say that Costello’s advocacy of making more nicotine products available is framed as “offering people who smoke more ‘choice’.” They point out that this “belief that greater variety will increase smoking cessation stands in stark contrast to the evidence her Ministry has provided” but that it’s in line with tobacco companies selling more such products.
The public health academics question this: “It is not clear why the Associate Health Minister appears to have found arguments made by tobacco companies more persuasive than the high-quality advice provided by the MOH.”
The Health Coalition Aotearoa has also strongly condemned Costello’s approach today and pointed out that the World Health Organization says: “All heated tobacco product (HTP) components should be regulated as stringently as other tobacco products”.
They challenge Costello to be more transparent about how she has made her HTP tax-reduction decision: “The Associate Minister of Health needs to let New Zealanders know where she is getting her advice from, because we know it’s not from experts in public health or her own Ministry advisers.”
Has “Big Tobacco” been influencing the Government’s policies on smoking?
The cut to taxes on HTPs is only the latest of several controversial smoking and tobacco changes made by Casey Costello and the new Government. More controversially, the Coalition repealed the smokefree generation law of the last government.
There were suspicions that tobacco lobbyists had a hand in this change, which wasn’t communicated before the election. Interestingly, the British Government had intended to introduce similar laws this year but abruptly dropped the plans after opposition from rightwing think tanks and tobacco companies. Last month, an investigation by the Guardian newspaper showed that “Rishi Sunak abandoned his ‘legacy’ policy to ban smoking for future generations amid a backlash from the tobacco industry in the form of legal threats, lobbying and a charm offensive aimed at Conservative MPs”. The report showed how four tobacco companies, including Philip Morris and British American Tobacco, worked together to force the Conservative Party to give up on its reforms.
Here in New Zealand, there have been fewer investigations into the industry's campaigns, but various journalists and academics have been keenly asking questions of the decision-makers. Last week, the Chief Ombudsman intervened in their favour, ordering Casey Costello to apologize for her unlawful handling of Official Information Act requests.
Judge Peter Boshier told Costello that she had to apologize to RNZ and Prof Janet Hoek for her decision to deny them access to official records. He said that she had withheld information in a way that was “unreasonable and contrary to law,” and he ordered her to fulfill their requests.
The Tobacco backgrounds and connections of political decision-makers
Given that the new Government continues to make decisions favouring the tobacco companies, it’s worth evaluating the personal linkages between the politicians and that powerful multinational industry.
Costello herself has a background that might have put her in contact with the industry. Although she is now a NZ First MP, she was previously active in the Act and New Conservative parties. She was also the chair of the Taxpayers Union, which has previously received funding from British American Tobacco and has taken extremely pro-tobacco policies.
NZ First is also connected with tobacco lobbyists. Philip Morris’ top lobbyist, David Broome, was the party's chief of staff between 2014 and 2017. He was also reported to be the author of the new Government’s Fast Track Bill. Also lobbying for Philip Morris is Apirana Dawson, who worked in Parliament and managed New Zealand First’s election campaigns in 2014 and 2017. Dawson is still close to Shane Jones, who says he uses him for advice on developing policies.
Other senior coalition politicians have backgrounds with tobacco companies. Minister Chris Bishop also worked as a lobbyist for Philip Morris before entering Parliament. Finance Minister Nicola Willis used to be a director of the think tank the New Zealand Initiative, which has been funded by British American Tobacco and Imperial Brands.
But even Prime Minister Christopher Luxon has a close connection to the tobacco industry—his sister-in-law, Barbara Luxon, has worked for British American Tobacco as a trade and marketing coordinator for the last twenty years.
These connections might not usually be relevant. But because the new government has continuously made decisions that strongly favour the industry and are opposed by health officials, they take on more weight.
Although the focus has mostly been on Casey Costello because she is the Minister responsible for tobacco issues, it’s worth remembering that ultimately, the Cabinet has made all of these decisions on tobacco. It’s now on them to convince the public that they’re not in the pocket of “big tobacco.”
Dr Bryce Edwards
Political Analyst in Residence, Director of the Democracy Project, School of Government, Victoria University of Wellington
This analysis is supplied exclusively to Democracy Project Substack subscribers and the New Zealand Herald.
Key Sources
Rob Davies and Matthew Chapman (The Guardian): Revealed: how Sunak dropped smoking ban amid lobbying from tobacco firms
Guyon Espiner (RNZ): NZ First Minister Casey Costello orders 50% cut to excise tax on heated tobacco products
Guyon Espiner (RNZ): NZ First Minister Casey Costello forced to apologise after acting ‘contrary to law’
Janet Hoek, Jude Ball, Andrew Waa, Anna Graham-DeMello, Richard Edwards, and Melissa-Jade Gregan (Public Health Communications Centre): Mind the gap: Associate Health Minister’s actions conflict with Ministry advice, align with tobacco industry lobbying
Brett Kerr-Laurie (The Post): Tobacco companies gain customers as NZ cuts tax on addictive devices (paywalled)
RNZ: Minister Casey Costello says heated tobacco tax cuts a 'trial'
Stuff: Watch: Professor ‘flabbergasted’ over Govt cutting excise tax on Heated Tobacco
