Government stubbing out duty-free cigarette stock-ups

Photo / Richard Robinson

The days of bulk-buying cigarettes at the border are over after the Government revealed its latest anti-smoking policy would cut the duty-free allowance from 10 cigarette packs to two.

The policy was expected to wipe between $7 million and $8 million off Auckland airport's revenue.

Associate Health Minister Tariana Turia said she considered completely removing the duty-free allowance in next week's Budget - which health groups have demanded for years - but was concerned about the huge increase in workload for Customs.

Instead, travellers entering New Zealand after October would have their tax-free allowance cut from 200 cigarettes to 50 cigarettes, or 50g of tobacco or cigars. Tobacco imported from overseas would no longer get a gift concession and would be subject to a duty and GST tax.

The changes would raise $50 million in additional tax revenue a year, while costing just $2.7 million in initial compliance costs.

Auckland airport's general manager of retail Richard Barker said the airport would inform travellers of the proposed changes.

"Auckland airport estimates that the potential full-year impact of reducing the duty-free allowance ... could reduce the company's revenue by approximately $7 million to $8 million," he said.

British American Tobacco, which sold Benson & Hedges, Dunhill and other tobacco brands, said the change would have a small impact. Spokeswoman Dawn O'Connor said around 2 per cent of its sales were duty-free.

She predicted the damage to New Zealand's tourism brand would be greater, because it put the country at an economic disadvantage.

Australia made the same policy change in 2012. A spokesman for Duty Free Stores New Zealand, an Australasian company, said tobacco sales had since fallen in Australian outlets but the impact had been absorbed through sales of other products.

The Government hiked tobacco taxes 10 per cent in 2013 and 2014, and planned further increases in 2015 and 2016.

A New Zealand Medical Journal study showed that the importing of duty-free cigarettes had ballooned since the tax hikes, with missed tax revenue jumping from $38 million in 2008 to $89.1 million in 2012.

Cutting back

• Duty-free allowance cut from 200 cigarettes to 50 cigarettes, gift duty introduced (2014).

• Four annual tobacco tax hikes of 10 per cent from 2012, increasing price of 20-pack from $14 to more than $20 (2012).

• Tobacco products and advertising must be hidden in stores (2011).

• Plain packets for tobacco (before Parliament, contingent on overseas legal cases).