The government of New Zealand will set aside NZD216 million ($127.39 million) to pay for tax cuts on heated tobacco products (HTPs), reports Radio New Zealand.
Earlier this month, Associate Health Minister Casey Costello announced a 50 percent cut to HTP excise taxes, arguing that doing so would encourage cigarette smokers to migrate to less unhealthy nicotine products.
A paper released on the health ministry’s website shows the Cabinet agreed in May to set aside NZD216 million to cover the estimated lost revenue.
Philip Morris International, which owns the bestselling HTP product in New Zealand, has long argued that tax levels should reflect the relative risk levels of tobacco products.
However, the Cabinet paper noted it was unclear whether the tax break would be passed on to consumers due to the monopolistic nature of the market.
Costello said that she expected the industry to reduce the cost of its heating products. “I’m expecting the excise reduction to pass to consumers; this is what we were advised would happen by officials and it is something we will also be monitoring,” she was quoted as saying.
New Zealand tax authorities collected NZD3.62 million in 2022 and NZD5.97 million in 2023 from HTPs.
Earlier this year Costello scrapped laws that would have slashed the number of tobacco retailers, removed 95 percent of the nicotine from cigarettes and aimed to create a smoke-free generation by banning sales to those born after 2009.
Critics have expressed concern about links between the tobacco industry and Costello’s New Zealand First party. Two senior corporate communication positions at PMI are held by people who previously held senior roles in the New Zealand First.