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Article | The impact of an increase in excise tax on the retail price of tobacco in New Zealand

New Zealand’s largest tobacco company is not keeping the recommended retail pricing for its leading budget brand in line with tobacco excise tax increases, according to this University of Otago study led by ASPIRE2025 researcher Dr. Louise Marsh.

Abstract

Background:

In 2010, the New Zealand (NZ) government introduced annual 10% tobacco excise tax increases. We examined retailers’ adherence to recommended retail prices (RRP), and whether the RRP included the full tax increase.

Methods:

We collected price data on three British American Tobacco (BAT) factory-made cigarette brands, (premium, mainstream, and budget), and one roll your own tobacco brand before and after the 2014 tax increase from a sample of tobacco retailers. We examined price increases in each tobacco brand and compared to the RRP. The extent to which the excise tax increases had been included in the RRP since 2010 was estimated using data sourced from the Ministry of Health and NZ Customs.

Findings:

The median increase in price from before to after the tax change was only 3% for the budget brand (461 retailers). This contrasted with the median of 8% for the premium brand (448 retailers), and 11% for both mainstream and roll your own brands (471 and 464, retailers respectively). While many retail outlets made changes according to the RRP set by BAT, several did not comply. Our analyses suggest BAT may be under-shifting excise tax on the budget brand, and over-shifting tax on brands in other price partitions.

Conclusions:

Tobacco companies do not appear to be increasing the RRPs of budget brands in line with tobacco excise tax increases. The increasing price differential between budget brands, and mainstream and premium brands may undermine cessation and impede realisation of New Zealand’s Smokefree 2025 goal.

Citation:

Marsh, L., Cameron, C., Quigg, R., Hoek, J., Doscher, C., McGee, R., Sullivan, T. (2015) The impact of an increase in excise tax on the retail price of tobacco in New Zealand. Tobacco Control 2015;0:1–6. doi:10.1136/tobaccocontrol-2015-052259

To read more:

Full article in Tobacco Control
Media release

For more information please contact:
Louise Marsh
University of Otago
email louise.marsh@otago.ac.nz