Increasing tobacco prices, through taxation, is one of the most effective measures to reduce smoking. In April 2010, Australia introduced a 25% increase in the tobacco excise and excise equivalent customs duty.
The Government began implementing staged annual 12.5% tobacco excise increases and excise-equivalent customs duty on tobacco and tobacco-related products on 1 December 2013, followed by additional 12.5% increases on 1 September 2014, 2015, 2016 and 2017. These annual excise increases will continue between 2018 and 2020 inclusive.
In addition, Australia is the only country in the world to index tobacco excise to wage inflation average weekly ordinary time earnings (AWOTE) to ensure that tobacco products do not become relatively more affordable over time.
These increases are expected to bring the percentage of excise tax in the retail price of cigarettes in Australia much closer to the World Health Organization (WHO) recommended benchmark of 70%. Whilst the Government has been active in raising the excise on tobacco products, the tobacco industry routinely increases its prices, which affects the Government’s ability to maintain this ratio.
As of 1 March 20171,2, the tobacco excise applied to five leading brands of manufactured cigarettes ranged from 52% to 60% of the total recommended retail price of these products, with total taxes (tobacco excise plus GST) ranging from 61% to 69% of the recommended total retail price.3
The tobacco excise applied to four leading brands of roll-your-own tobacco ranged from 60% to 62% of the total recommended retail price of these products, with total taxes ranging from 70% to 72% of the total recommended retail price.4
As part of the 2017-18 Federal Budget, ‘roll -your-own’ and other tobacco products such as cigars will be subject to the same tax treatment as manufactured cigarettes. It is intended that this measure will ensure fairness and efficiency in tobacco taxes by bringing the taxation of roll-your-own tobacco products in line with manufactured cigarettes.
1 These estimates are subject to a number of limitations, particularly if used in isolation to monitor Australia’s progress in reducing the affordability of tobacco products. They do not necessarily reflect the variable price of a particular tobacco product paid by a consumer at the retail level.
2 Estimates based on market share (volume) data as at 2015 from Euromonitor International. Further information is available at: http://www.tobaccoinaustralia.org.au/chapter-10-tobacco-industry/10-6-market-share-and-brand-share.
3 Estimates based on recommended retail price list of Winfield 25s, Longbeach 30s, Horizon 30s JPS 26s and Peter Jackson 25s. (http://wholesale.pattersonroad.com.au/rrp_cigarettes.jsp)
4 Estimates based on the recommended retail price list for 50g packs of Champion Ruby, Winfield, Drum and White Ox, available at: http://wholesale.pattersonroad.com.au/rrp_tobacco.jsp.