Taxes on tobacco are no longer working to lower smoking rates and instead fuel a cigarette black market, say economists.
Australian cigarettes are currently the most expensive in the developed world, but economists suggest a different approach to reducing smokers.
A freeze or lowering of the excise rate has been brought forward as the alternative solution by economists and politicians alike, as the black market for tobacco in Australia continues to grow, with violence, as smoke shops across Victoria have been targeted with firebombing in recent months.
This follows the New South Wales premier, Chris Minns, calling on the Federal government to cut the tax last week, to reduce the tobacco black market.
The tax has helped reduce smoking in Australians over the last two decades. However, the director of the Australian National University’s tax and transfer policy institute, Bob Breunig says the evidence is "pretty clear" that increasing the tax is not reducing it anymore.
“The point is to get people to smoke less, and it’s not working. I don’t think we should lower it, but freezing it is a good idea, and then doing something that deals with illegal tobacco is the next obvious step,” Breunig said.
“Our tobacco policies have been very successful versus other countries. We’ve had a big success story and we’ve gone as far as we can go with the excise. Now it’s time to pull other levers, such as more education.”
