22/05/2025
Tobacco Tax Rises
22 May 2025
I started it, but look what has happened now.
In 1983 I attended the 5th World Conference on Smoking and Health in Winnipeg, Canada. It was all about the health effects of smoking. There were no activist or political sessions and Stan Glantz of American for Non-Smokers Rights called an evening meeting for those interested. I gave a paper on BUGA UP, which was the only paper that had to be given again because the room was too small for the audience.
I met a very significant figure, William Weis of Seattle who had a paper on the price sensitivity of tobacco. He said that if the price of cigarettes went up 10%, total consumption would go down 4.5%, so if the rise was tax, the government would make money. He also said that young people were more price-sensitive than adults, so consumption by those under 18 would go down 12% and uptake by young people would also go down by 12%.
Thus tobacco tax was a good revenue measure and good for public health.
I came home and wrote to the health minister without effect, but I also wrote to the Anti-Cancer Council of Victoria (ACCV) and ACOSH, (Australian Council on Smoking and Health) who were in WA. They were the most active bodies on tobacco in Australia at that time.
Australian tax was low by international standards at that time, being 50%. Only the US was lower among developed countries at 36%. Denmark had the world’s highest at 85%.
The Australian tobacco growers were supported by the TISP (Tobacco Industry Support Program), which subsidised them as they could not compete on price with developing countries such as Zimbabwe. The Australian tobacco manufacturing industry, mainly British American Tobacco- AMATIL and Rothmans bought just over 50% of their tobacco from the Australian growers, who were mainly in Queensland, with about 20% in Victoria and about 3% in NSW. They did this although it was more expensive because the farmers were useful as a lobby group, and the tobacco was only about 1% of the final price anyway.
The ACCV took up the excise case and started to lobby the Federal government for the 1984 budget. At that time there were both Federal and state taxes.
The campaign against tobacco in Australia differed from those in other countries largely because of the existence of BUGA UP, which had first become active in 1979. In most countries, the health lobby had been beavering away for years with little success, as the tobacco industry simply funded political parties on the deal that they could say what they liked about tobacco, but not legislate against it till the next election, when they would offer the same deal.
The smokers were said to know the risks and were supposedly happy to take them. The Non-Smokers Rights Movements, who did not like the smoke, were the forefront of activism around the world, but the industry painted the battle as one between smokers and nonsmokers and asked for tolerance and understanding. This naturally translated into non-smokers putting up with the smoke.
Great store was placed on the medical evidence of a Japanese professor, Takeshi Hirayama, who published a paper in the BMJ in 1981 showing that wives of smoking men had a higher incidence of lung cancer than wives of non-smokers. Naturally the tobacco industry denied all this, and governments, paid to dither, did nothing except talk. The Non-Smokers Rights groups did make it a political issue and tried to use product liability cases to advance their cause.
In Australia, Geoff Coleman a still unknown activist and one of the three founders of BUGA UP reframed the debate, saying it was not a battle between smokers and non-smokers; Tobacco was a rogue industry, happy to kill people to make its profits, and buying the advertising industry and the politicians as part of this business model. The advertising industry similarly was happy to say anything that its clients wanted without regard for the consequences of the consumption changes that they achieved. Hence the BUGA UP acronym, Billboard Utilising Graffitists Against Unhealthy Promotions. Cigarette billboards were about half of all outdoor advertising at that time and by far the most prolific at points of sale, so that general stores were chiefly recognisable because they were covered in tobacco ads. The key BUGA UP concept was that anyone could paint (reface) a billboard and sign it BUGA UP, so there would be a unifying concept from a public point of view without any formal structure. BUGA UP also wanted to tap into the Australian larrikin image and to use humour to satirise the absurd imagery of the tobacco ads. There were also street protests and disruptions of tobacco promotions, which were happening in shopping centres, pubs and music venues as well as all the sports sponsorships. BUGA UP activists were arrested for graffiti vandalism or staying on premises against orders to leave, and the court cases were played for publicity, and to contrast that some people were being arrested for doing good, while the industries were getting away with doing bad.
It must be mentioned that when tobacco advertising was banned from TV, the industry had switched to sponsorship, which meant that rather than paying the Telecaster directly, they paid the sport. This had two advantages; it was cheaper in terms of the amount of time that the brand was on TV, and it also gave them a political ally if there was any attempt to ban the sponsorships. They gave money to basically anyone who would take it, supporting cultural events and ethnic clubs to build the lobby, so while BUGA UP was winning the PR battle against the industry, it was getting its allies in order. This played out in Western Australia where the government tried to ban tobacco sponsorship in 1984 and was defeated. In Victoria the health forces were more successful with the Victorian Tobacco Act or 1987 raising tobacco excise to do three things; replace the tobacco sponsorships of just about everything with health promotion messages, have some grants for organisations that would promote health and fund some medical research. All the political opposition was bought out except the Tobacco industry itself. Health promotion foundations were created in Victoria, SA and WA, but the industry managed to get other State treasuries to stop the further spread of them by saying that they created the precedent of hypothecated taxes, which would reduce Treasury control over where money was spent.
Excise taxes were later rationalised so as only to be collected Federally after a High Court case ruled that States could not collect such a tax. (Ha v NSW in 1997, Ha was a tobacco wholesaler).
The rise of vapes is another story. As World Conferences on Tobacco and Health, (Later changed to Tobacco or Health) went on, the tobacco industry used to run parallel conferences in the same cities with tame doctors are produce a book of proceedings of these with summaries that took a very anodyne view of the tobacco problem, to encourage the idea that legislation was not really needed, edited by people such as Robert Tollison. These books were then sent free to public libraries, some of them mistaking them for proceedings of the world conference as the dates were similar. The tobacco industry also wanted to medicalise the whole issue of quitting, so that addiction was a medical problem to be treated by gradually reducing nicotine doses in lozenges or patches. Their conferences were often subsidised and created a market and a rationale for practitioners in Quit Clinics.
The technology of the quitting devices kept being ‘improved’ until they were a whole new drug delivery device, ready for a new market. Some companies that were ahead of the tobacco industry in their technologies were bought by the industry, who were taking advantage of the new social media market that could reach young people without older demographics being aware of what was happening. Some of the medical folk, obsessed by the carcinogenesis of tobacco, and influenced by harm minimisation strategies from hard drugs and AIDS advocated vapes as a quit aid, which immensely helped the tobacco industry in avoiding having to prove that vaping chemicals were safe; they just had to be better than cigarettes, an easy bar to clear.
At a political level, the last Federal Health Minister to take tobacco seriously was Nicola Roxon in the Gillard government. After this there were some Liberals, perhaps helped by vaping associated party donations, who felt that vaping should be encouraged, and certainly not regulated against. So instead of working hard to get the remaining lower demographic of smokers to quit, and linking vaping to smoking as other undesirable health behaviour, there was no real action, except on tobacco excise. This continued to be raised, so that the price was far too high for the poorer demographic who continued to smoke, so there was a huge margin of profit for chop chop, tobacco leaves from the farm, or for imported smuggled cigarettes.
The social marketing of vaping products had gone on unabated and medical research was trickling in showing that as many young people started vaping and went to smoking as ever managed to use vapes to quit. There were a few cases of deaths from vaping and scientific evidence that the cilia, the tiny hairs that move to mucus up the bronchi to clean out the lungs were adversely affected, but the industry has naturally ignored these and have reversed the onus of proof politically. Now they do not have to prove it is harmless, the medical profession will again have to prove it is harmful and get this through the political process. Last time this took 50 years; from smoking being linked to lung cancer in 1950, to a ban on indoor smoking in NSW in 2000.
Now with no action except excise rises since the election of the Abbott government in 2013, Labor is trying a prohibition approach that is unlikely to succeed. The vaping industry marketing is significantly controlled by tobacco and vapes are largely distributed by organised crime. An article in the SMH stated that there were 60 tobacconists for every McDonalds (SMH 19/5/25). Many recent stories of firebombing of tobacconists emphasise the criminals’ power. The challenge to stamp out vaping by medical evidence and the marketing of such evidence is now a huge challenge that I no longer have either the expertise nor the energy to tackle. Here is an update from the SMH.
The tobacco tax is a disaster playing out on our streets and in our budget
By Shane Wright
SMH May 19, 2025
The tax and policing approach to tobacco across this country is becoming a social, economic and legal disaster.
This disaster is playing out in our streets – from more than 120 arson attacks across Melbourne that have claimed at least one life to dodgy looking tobacco shops in Newtown and small “farms” in rural areas with unusual-looking cash crops, it’s clear to anyone that the current system is failing.
Not only is criminal activity becoming the norm, hundreds of thousands of ordinary people are being dragged into breaking the law every time they light up a cheap ciggie.
America launched a war on drugs, and it failed. What’s going on in this country at present is eerily similar.
Not only have ever-more expensive cigarettes created market opportunities for organised crime, but they’ve also provided smokers with products that could be worse for their health than legal products.
That’s the human side of ever-increasing excise rates being used to tax smoking out of existence. There’s also the economic side.
Treasurer Jim Chalmers is dealing with what is now a $43 billion hole in tobacco excise since 2020 that affects the provision of services, welfare and infrastructure to the entire community.
That’s due to governments of both political persuasions overestimating just how much revenue their assault on tobacco would reap for the budget bottom line. And, as revenue has fallen, governments have spent more money on trying to make up for the cash shortfall.
The situation is so out of hand that in his pre-election budget, Chalmers pumped an extra $156.7 million over the next two years into increased efforts to police the illicit tobacco trade. That was in March.
In January last year, the government announced an extra $188.5 million over four years for Border Force to work with the states in a “co-ordinated effort to tackle all aspects of illicit tobacco”.
That extra policing was partly paid for by another increase in tobacco excise, worth 5 per cent a year for three years, that began on September 1, 2023. At the time, it was estimated it would garner an extra $3.3 billion in excise revenue.
But it’s clear that it did not. In the two years since that excise increase was announced, excise collections for 2023-24 and 2024-25 have been downgraded by $9.3 billion.
Apart from the extra resources pumped into state health departments, the country now has its own version of Eliot Ness in the form of Erin Dale, a senior Border Force official who is the nation’s “Illicit Tobacco and E-cigarette Commissioner”.
Public health advocates in this country have led the way in trying to reduce tobacco consumption. From ending television commercials to sports sponsorship and plain packaging, they’ve made huge strides in making cigarettes as unattractive as possible to potential new smokers.
Price – through tax – has been another key element to their strategy. But somewhere along the line, the key economic concept of substitution has been ignored.
In this case, the substitution is whether people switch to chemist-only vaping products or get their fix via the black economy. And guess what? Australians have done both.
Given the way smokers are more likely to be lower-income earners, every large lift in excise disproportionately affects those least able to afford it. The assumption was that these people would give up.
Instead, the economy came up with another solution – a thriving, illegal but cheap market.
Public health officials, police and politicians have to come up with another way to deal with the explosion in illicit tobacco. The starting point has to be an acknowledgment that there is a cohort of people who will continue to smoke, no matter the health impacts.
And this approach has to cut the cord between federal governments and higher excise as an easy way to repair the budget. Tobacco excise is just a sign of the problems for the budget that are coming as petrol- and diesel-powered vehicles give way to electric ones.
At the end of The Untouchables, Ness is asked what he was going to do if Prohibition came to an end.
“I think I’ll have a drink,” he replies.
We don’t want a situation where people just light up and do irreparable damage to themselves and their loved ones. But we can’t continue with a series of policies that are not working.