Government could face lawsuit over duty-free cigarette ban

The price of 20 Longbeach Filter cigarettes is $5.19 in the duty-free shop, and $13.10 in the supermarket. Photo / Thinkstock

A proposed ban on duty-free allowances on tobacco may open the Government to legal challenges from international investors, depending on how it is framed.

The Heart Foundation, the Auckland Regional Public Health Service and other health groups have asked MPs considering the tobacco tax legislation - the bill to boost the excise - to support scrapping the allowances for duty-free tobacco.

Global Public Health director Trish Fraser, formerly the director of Action on Smoking and Health (Ash), has framed her request to Parliament's finance and expenditure select committee as a "ban on the sale of duty-free cigarettes".

Auckland University's Centre for Tobacco Control Research, however, has asked for the duty-free policy to be aligned with Australia's, which limits imports to 50 cigarettes. Travellers to New Zealand are allowed to bring in 200 cigarettes duty-free.

"Completely removing duty-free allowances in New Zealand may have unintended consequences by making the Government vulnerable to legal challenges," said research fellow Nathan Cowie. He cited a report by international law expert Professor Jane Kelsey on trade law and tobacco control, which says a ban on duty-free sales is "potentially problematic".

"A total ban on tobacco sales in duty-free stores would be a market access restriction under [international agreements], where New Zealand has unlimited commitments for retail distribution services. A lesser measure would avoid these problems."

The Government is investigating the options. Prime Minister John Key said cutting the duty-free allowance was a possibility, but he needed further advice on the legality of it first.

Tobacco companies argue that steep tax increases on tobacco will encourage the black market and make dairies and service stations greater targets for robberies.

Philip Morris spokesman Chris Bishop said increasing tobacco taxes to prohibitive levels would encourage black-market traders and increase the risk of robbery for dairy and service station owners.

The Ministry of Health has dismissed tobacco company claims about potential large-scale black-market activity as "greatly exaggerated".