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The impact of an increase in excise tax on the retail price of tobacco in New Zealand
  1. Louise Marsh1,
  2. Claire Cameron2,
  3. Robin Quigg1,
  4. Janet Hoek3,
  5. Crile Doscher4,
  6. Rob McGee1,
  7. Trudy Sullivan2
  1. 1Cancer Society Social and Behavioural Research Unit, University of Otago, Dunedin, New Zealand
  2. 2Department of Preventive and Social Medicine, University of Otago, Dunedin, New Zealand
  3. 3Department of Marketing, University of Otago, Dunedin, New Zealand
  4. 4Faculty of Environment, Society and Design, Lincoln University, Canterbury, New Zealand
  1. Correspondence to Dr Louise Marsh, Cancer Society of New Zealand Social and Behavioural Research Unit, Department of Preventive and Social Medicine, University of Otago, P.O. Box 913, Dunedin 9054, New Zealand; Louise.marsh{at}otago.ac.nz

Abstract

Background In 2010, the New Zealand (NZ) government introduced an annual 10% tobacco excise tax increase. 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 these with 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 undershifting excise tax on the budget brand, and overshifting 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.

  • Price
  • Public policy
  • Taxation
  • Tobacco industry

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