Excise Tariff Amendment (Tobacco) Bill 2016, Customs Tariff Amendment (Tobacco) Bill 2016

Wednesday, September 14, 2016

Senator DI NATALE

I rise to speak today in support of the Excise Tariff Amendment (Tobacco) Bill 2016 and the Customs Tariff Amendment (Tobacco) Bill 2016—the legislation to increase the excise on tobacco by 12.5 per cent per year for four years from September 2017. Most people know that smoking is harmful. The statistics are actually quite alarming and, when you sit down and reflect on those, you understand the public policy imperative to try and drive down smoking rates. We know that cigarettes kill one in two regular users—that is: half of all smokers die as a result of their habit. We know that smoking is estimated to account for at least 20 per cent of all cancers in Australia, and it is the cause of approximately 15,000 fully preventable deaths in Australia each year. Smoking is responsible for about $30 billion in social and economic costs each year, which is a huge burden on the health system and, clearly, on the economy more generally.
We know that if tobacco as a product were to come onto the market today and an attempt were to be made to license it for use, it would fail. An attempt to get a licence to sell a product that kills one in two of its regular users is something that no regulator would contemplate. It is a harmful product and, for that reason, governments consistently, right across the world, have tried to implement public policies that drive down smoking rates.
If you look at the success of the different measures that help drive down smoking rates in public health, there are a range of things that we know have worked across a range of areas. We know that promotion is important and that restricting the promotion of products that are harmful has an important role to play. It is why, many years ago, there were strict limits placed on advertising, whether through electronic or print media, and so on. We know that availability is also an issue—we do not make cigarettes available at the front counters of shops but have them behind registers and available only to people of a certain age. And, most recently, on packaging, when it comes to smoking, we were trailblazers. We were the world's first plain-packaging country, with legislation in 2012, and, since the introduction of that measure, we have seen smoking rates fall by about 11 per cent.
So there are a range of public health measures that we know work: measures on promotion, availability, packaging—they are all effective public health tools that can be used to drive down consumption. But price is also an important factor. Price is, clearly, one of the most effective tools for helping drive down consumption. You can deter people from smoking by raising excise, and we know that, every time excise on tobacco is raised, smoking rates fall. If we continue to use this as an intervention, we know that the impact will be that we will save the lives of people who would otherwise have taken up the habit or of people who smoke and will cease to do that as a result of increases in price.
That raises a number of questions around that particular policy lever. What is the role of taxation in society? We know that one of the roles is to address huge issues like income inequality via redistribution. One of the reasons that we levy taxes is to redistribute income so that we can do something about issues like income inequality.
We know that, sometimes, we need to levy taxes to try to address externalities. We have seen that in a number of areas. We have seen Australia adopt carbon pricing legislation in an attempt to effectively put a price on an externality to ensure that that externality was dealt with by the source of that pollution. Sometimes those two things come up against each other. So, when it comes to the taxes sometimes called behavioural taxes or Pigouvian taxes, we see that they can have negative distributional impacts, and that is certainly the case with issues like tobacco excise. If you raise the excise on tobacco, the people on whom it will impact most are people on low incomes, who tend to have higher rates of smoking but are also most susceptible to those increases in prices.
So raising excise cannot be seen in isolation. It needs to be seen within our broader system of tax and transfers. If we are going to levy taxes, like an increase in tobacco excise, then we also need to be dealing with issues like rising inequality through addressing the tax and transfer system.
That is why today's announcement from the government—with the support of the Labor Party—that they will seek to increase the burden on the most vulnerable people in society cuts right across a measure like this, because, when you are going to introduce effective taxation measures, when it comes to restricting particular forms of behaviour, the measures have to be coupled with addressing the distributional impact of those taxes. So we are very disappointed that, on a day when we are debating an increase in the tobacco excise, we are also talking about reducing support for some of the most vulnerable families in Australia.
These issues need to be seen in totality. If we do this properly—if we address the issues of inequality and the negative impacts of policies like an attack on the vulnerable through removing the clean energy supplement or, indeed, restricting access to family tax benefits—it should not be limited to tobacco excise. For example, during the most recent election campaign, the Greens announced a policy on sugar sweetened beverages. We did that because sugar sweetened beverages account for 20 per cent of the added sugar intake for all Australians and up to 30 per cent of those Australians between the ages of 14 and 30.
So, if you have got an effective public health system, you need to engage with prevention and you need to adopt those measures that are based in sound evidence. Using price as a measure to reduce harmful behaviours can be very effective in reducing chronic diseases, in reducing ill health and in reducing avoidable hospital admissions. Of course, if you do that, along with addressing issues like inequality through the tax and transfer system, you have a system that is working to improve the health of Australians while still providing people with the choice to engage in those behaviours if they see fit to do so, but you are doing everything you can as a society to limit the harms on the individual and the costs on society, and addressing those externalities by redirecting that funding to our health system.
When it comes to issues like sugar sweetened beverages, we know that a price increase of 20 per cent on sugar sweetened drinks, or about 20c on a can of cola, will result in a 12 per cent drop in consumption, which is even higher if you talk about people who consume a lot of the stuff. So, again, we think that this is an effective measure relating to sugar sweetened beverages. It has been modelled to reduce the rate of obesity in this country and it has been modelled to show a demonstrable decrease in the incidence of diseases like diabetes and heart disease. It is something that has been recommended by the World Health Organization as a key measure to reduce obesity rates.
Just like big tobacco has fought the rise of an excise on cigarettes every step of the way, we know that big junk food will continue to do the same. The point here is that the companies who resist these measures most are the ones who benefit from the consumption and increased consumption of these harmful products, and our job in this parliament is to stand up for the interests of the community, and not to do the bidding of big industry.
It also is related to the issues of donations reform, something that we have spent a lot of time discussing in this parliament over recent days. It is no surprise that as restrictions on donations from the tobacco industry to political parties began to take effect we started to see the parliament act to adopt measures that would restrict or limit the number of people who take up smoking. And that is why donations reform is so critical; we need to address the influence of some of those big, vested interests, when it comes to issues like junk food and alcohol, so that we can get public policy in the national interest.
Alcohol is another product which we know is consumed by many Australians. Many Australians enjoy the occasional drink, but we also know that price is a very important influence on the consumption, and particularly the harmful consumption, of alcoholic beverages. Again, it is classic public health; when we look at issues around price, promotion and availability, the consumption of alcohol is related very directly to each of those individual areas. In terms of promotion, we still allow the promotion of alcoholic beverages to young people through, for example, broadcasts of sporting programs, and we need to do much more in that area.
When it comes to the consumption of alcohol, there has been a lot of discussion around a floor price, or indeed a volumetric tax, so that the taxation of alcoholic products is based on the volume of alcohol in each of those products. Again, we know that when you do that you start to get a much more rational distribution around the consumption of alcohol and you reduce harms. So the principle here is one that is very, very clear and one that the Greens support.
Let's acknowledge that, when it comes to those products that have the potential to cause harm to the individual or those products that have the potential to cause harm more broadly within the community, and where those harms are often imposing costs on our health system, we have a responsibility to address those harms by using the effective public health tools that we have in front of us, including the issue of price as a way of taxing those externalities and paying for the services that the consumption of those products often leads to—that is, within that health system.
I will conclude by saying that I do welcome the government's acknowledgment that in taxing tobacco we can have a positive impact on people's health and the choices that they make. I also have to express at least a note of cynicism. It seems that this government's motives are driven less by their concern around the health of individuals and more around balancing the budget and knowing that this was a measure that would have the support of the parliament. Nonetheless, it is an important measure.
We Greens are very committed to the fight to drive down the rates of smoking. We also want to see the government show some leadership and follow the evidence in setting a price signal not just on tobacco but on sugary drinks and alcohol—and recognising that pricing harmful products has a very important role to play in reducing harms in our community.

Senator LEYONHJELM
I rise to speak on the Excise Tariff Amendment (Tobacco) Bill 2016 and the Customs Tariff Amendment (Tobacco) Bill 2016. When the Liberal Democrats were first established in the ACT in 2001, the very first issue the party campaigned on was the right to choose to smoke. One of the founders of the party actually took up smoking for the duration of the 2001 election campaign. Smoking was not endorsed or recommended. It was all about adults being free to choose for themselves, not treating adults like children.
I did not join the Liberal Democrats until 2005, but the policy remains the same. We do not believe governments have any right to intervene in the choices made by adults, except to prevent harm to themselves. Twelve years later, in other words in 2013, the party received its first donation from a tobacco company—it pays to be patient. You would have to be really imaginative to suggest that our policies were influenced by donation.
I do not smoke cigarettes. I smoke the occasional cigar. I think cigars are a little bit like fine wine. I do not recommend smoking cigarettes, and I fully accept that it would be best if everyone gave it up. But not liking something, not doing it yourself and not recommending it does not give you a licence to prohibit it, tax it or harass those who do it—whether it is smoking, drinking or even eating McDonald's. Government policies towards smoking are characteristic of what is wrong with Australia. We are overgoverned, overtaxed and overregulated. It is true that a lot of people disapprove of smoking, but the correct response to that is: if you don't like it, don't do it. It is not compulsory. If others choose to smoke, unless they are blowing smoke in your face, leave them the hell alone. Unfortunately, we are a long way from that. We are surrounded by people who are troubled by the worrying thought that someone, somewhere may be having a good time.
As a result of the existing tobacco taxes, Australia currently has close to the most expensive cigarettes in the world. With the increase in excise these bills will authorise, we will unquestionably have the most expensive cigarettes in the world. That is nothing to be proud of. A typical pack of 25 branded cigarettes currently costs about $30. Of this, about three-quarters is swallowed up by the government. But, of course, too much is still not enough. As a result of this legislation, smokers will get little change from $40 for a pack, and $32 of that will be tax. The burden of this falls heaviest on our poorest citizens. Smoking is highest amongst low-paid workers, the unemployed and Indigenous peoples. Among prisoners, ex-prisoners and drug users it is well over 50 per cent—some say over 90 per cent. And, I have to add, a vast majority of these people would be Labor voters. Quite a lot of the revenue that the government collects in tobacco taxes is money it has paid to smokers in the form of benefits, including welfare and pensions. Raising tobacco taxes simply increases this churn, leaving poor families with lower standards of living and increasing pressure on the government to increase benefits.
We often hear the assertion that smokers hurt nonsmokers by claiming more than their fair share of government spending. This is simply not true. It is not something to be pleased about but by dying early smokers save the public purse. Smokers receive fewer years of age pension payments and incur lower lifetime public health costs than nonsmokers. A 2008 Dutch study found that, due to differences in life expectancy, lifetime health costs are highest for people with a healthy lifestyle, lower for obese people, and lower still for smokers. Other studies have found similar results. Perhaps we ought to be imposing more tax on running shoes, gyms and health food.
In 2013 smokers imposed net costs on Australia's healthcare system of $318.4 million. Depending on rainfall, smokers also cost the taxpayer roughly $150 million a year in bushfire control. And, yet, the government collects more than $9 billion in tobacco excise each year. Smokers contribute at least 17 times more than they cost the public coffers. Against that, we hear repeatedly the voodoo economics of Collins and Lapsley, who attempt to put a social cost on personal costs such as taking time off work or the grief of family members at illness and death. These are not costs borne by the government. Collins and Lapsley also take no account of the benefits of smoking. Many smokers actually enjoy smoking. These are similarly personal rather than social issues, and a decent economist would not take them seriously—but Collins and Lapsley cannot even get their voodoo economics right. Collins and Lapsley are wrong on so many levels, and yet bureaucrats who should know better use their dodgy data to pursue their nanny state agenda.
In reality, smokers are being used to raise revenue to spend on other things, and the purpose of the high taxes is not really to discourage people from smoking—that has already occurred as much as it is likely to; it is because governments cannot control their spending. Instead, they use disapproval of smoking to justify imposing discriminatory taxes. Even worse, the poor Indigenous prisoners and the mentally ill are paying for spending that is of most benefit to people who are much better off. These two bills, which will pick smokers' pockets, are not just about robbing the poor. They are about robbing the poor to pay the rich. There are lots of examples, but one of the worst is the plan by the government to extend childcare subsidies to people with incomes as high as $300,000 a year.
Another effect of the tax increase will be the continued growth of the illegal tobacco market. This accounts for about 14 per cent of the total tobacco market, as measured by KPMG. The government receives no revenue from the organised crime gangs that run this market and is now missing out on over a billion dollars a year in tobacco excise. That is a billion dollars a year that could go towards helping the genuinely needy, or reducing taxes so that more of the needy can get a job.
Around 13 per cent of the adult population smokes. These two bills increase taxes on them based on nothing more than the fact that they smoke, plus the fact that the ruling class disapproves of smoking, plus the fact that they think they can get away with taxing them more. Perhaps they will get away with it, but if the art of taxation is like the art of plucking a goose, removing the most amount feathers with the least amount of hissing, they are failing. Sooner or later—and I expect it will be sooner rather than later—the hissing will turn into active resistance. I look forward to that day.

Senator DUNIAM
Thank you very much, Mr Acting Deputy President Marshall.

Senator Williams
Should be Deputy President.

Senator DUNIAM
Hear, hear, Senator Williams! It was an interesting contribution from Senator Leyonhjelm. It was very well researched, and he made some interesting points. I am not sure that I agree with all of them, but I think his speech was very well thought through and it was interesting to listen to.
All of us in this chamber recognise that tobacco smoking is one of the largest preventable causes of death and disease in this country, if not the world. As a disease, it is associated with an increased risk of a wide range of health conditions, including heart disease, diabetes, stroke, cancer, renal disease and eye disease, and respiratory conditions such as asthma, emphysema and bronchitis—diseases that I am pretty sure all Australian families have been impacted by in one way or another, unfortunately. My family is no exception to that. Over the years, grandparents that smoked and probably lived a little bit too well died of heart disease and emphysema. Tobacco was responsible for 7.8 per cent of the total burden of disease and injury in Australia in 2003, equivalent to around 15,000 deaths per year. As has been noted by previous speakers in this debate, it was estimated to cost Australia around $31½ billion in health, social and economic costs in the years 2004-05.
Unfortunately, my own state of Tasmania has the highest smoking rates of all Australian states, with only the Northern Territory recording a higher rate of daily smokers. In 2011 Tasmania's smoking rate was 21.7 per cent, compared to a national smoking rate of 18 per cent. Within the Tasmanian population there are groups of individuals with significantly higher smoking rates than the general population. Currently, the smoking rate is especially high for males in my own age group, between the ages of 25 and 34, at 40 per cent of that population. In the 35- to 44-year-old bracket, it is at 38.6 per cent, which is alarmingly high, I think we would all agree. Tasmania continues to have the highest proportion of women who smoke during pregnancy, with a prevalence of 35.7 per cent for those aged under 20 and 30.8 per cent for those aged between 20 and 24. The smoking rate among Indigenous Tasmanians was found to be 44½ per cent in the year 2008—again, an alarmingly high statistic.
More alarming are the rates of smoking among minors, of those who are below the legal minimum age—something we as a country have been trying to stamp out for many years now. In 2011 the Australian secondary school alcohol and drug survey showed that six per cent of 12- to 15-year-olds were smokers, with 16 per cent of 16- and 17-year-olds having taken up the habit. I think that is a pretty unfortunate way to start young adult life. Most encouraging though is the changing attitude among adolescents and their growing awareness of health problems associated with the habit of smoking. In the 2011 survey, 96 per cent of students agreed that smoking causes lung cancer and that it harms unborn babies. The survey showed a changing attitude to smoking, with it no longer being seen as a normative behaviour among secondary students in Tasmania, which is something pleasing to report to the Senate.
The Australian government and state and territory governments, through the Council of Australian Governments, have committed by 2018 to reduce the national adult daily smoking rate to 10 per cent and to halve the Aboriginal and Torres Strait Islander adult daily smoking rate. This ambitious target is based on the relatively low smoking rate as compared internationally. Australia's low smoking rate though, I believe, is the result of sustained, concerted and comprehensive public policy efforts from all levels of government, of all political persuasions, and action from public health organisations.
In 1976 health warnings were first mandated on all cigarette packs in Australia. This was followed by a ban on cigarette advertising on radio and on television. In 1990, when I was eight, bans on the advertising of cigarettes in newspapers and magazines were introduced, and in 1993 all tobacco advertisements were banned. Between the years 1986 and 2006, bans on smoking in workplaces and public places were progressively phased in. For someone in my age demographic, it is hard to believe that there was ever a time when people were able to smoke at work or on aeroplanes or in other confined spaces, I must say. Between 1994 and 2003, we saw bans on smoking in restaurants. Efforts have also been made to change smoking behaviour, through using text-only health warnings in 1995; the more graphic health warnings, which we have all seen—and probably winced at—on packages in 2006; and plain packaging in 2012. Excise applied to tobacco has also proved to be an effective tool in shaping smoker behaviour, through increasing the price of tobacco.
I turn briefly to the history of tobacco excise. The federal government has imposed excise duty on Australian-made tobacco products and customs duty on imported tobacco products since 1901, since Federation. Until 1999 federal excise and customs duty were calculated on the basis of the weight of tobacco products. The excise regulation specified precisely how manufacturers needed to label, calculate and declare excise duty. It also specified how the weight of tobacco products, and the volume of alcohol and petroleum products, was to be calculated. For cigarettes, this included the weight of the filter and paper but not the weight of packaging. In the early years of the last century, manufactured tobacco was charged at a rate of one shilling per pound of product weight, and cigars were taxed at one shilling and one sixpence per pound. Since 1920 the rate of the duty has been set out, and frequently amended, in the schedules to the Excise Tariff Act. Historically, duty on tobacco in cigarettes was levied at a higher rate than duty on non-cigarette tobacco.
In November 1983, the then federal Treasurer, Hon. Paul Keating, changed customs and excise policy in several ways. First, the rate of federal excise and customs duty was linked with the Australian consumer price index, meaning that, since that time, excise and customs duty have automatically increased in February and August each year in line with CPI for the six months to the previous December and June. Second, the rate of duty for cigars was immediately made equal to that for cigarettes. Third, the rate for non-cigarette tobacco was increased by $5 a kilogram. In subsequent budgets, the rate for smoking-tobacco was increased further—by another $5 per kilo in the 1984 and 1985 budgets, and then by another $1.90 in the 1986 budget.
Historically, tobacco products produced in Australia were subject to a lower rate of duty than that applicable to imported tobacco products. Customs duty was brought into line with excise duty following the publication in June 1994 of a report of an inquiry by the Industry Commission into the tobacco-growing and -manufacturing industries in Australia. Coinciding with the end of the tobacco industry stabilisation plans, the harmonisation of customs and excise duty was in line with government policy to reduce a range of direct and indirect subsidies in an attempt to improve international competitiveness of Australian exports.
Throughout the 1990s, health groups lobbied for increases in federal excise duty. In addition to the six-monthly CPI increases, the government increased the rate of federal excise applicable to cigarettes and other tobacco products on several occasions. These included the $5 per kilogram increase in 1992 and increases announced in the 1993 budget of three per cent in August 1993, and of five per cent in February and August 1994 and February 1995. The final incremental rise of five per cent planned for August 1995 was brought forward and increased to an immediate 10 per cent rise in the federal budget handed down on 10 May 1995.
In 1999, after extensive lobbying by health groups, the government moved from levying excise and customs duty on cigarettes on the basis of weight to a system based on the number of cigarettes. Between 1999 and 2010, there were no increases in tobacco excise and customs duty on tobacco products, apart from adjustments for CPI. Excise and customs duty was increased by 25 per cent on 30 April 2010. In 2013, the excise was further increased by 12.5 per cent per year for four years. That has seen the cost of cigarettes increase from about $15 per pack six years ago to around $25 to $30 at present.
Increasing the tobacco excise is just one of a number of strategies aimed at encouraging young people to quit smoking, as has been noted by previous speakers. It also aims to help stop people from commencing smoking in the first place, especially younger people, and is seen as an important step in reducing the prevalence of smoking in Australia.
Earlier this year, when the excise increase was first announced, the chief executive of the Cancer Council of Australia, Professor Sanchia Aranda, was reported as saying:
… price is an important factor in people's decision to smoke.
"Every time you increase the excise consumption goes down. We anticipate if there were four of these recurrent tobacco increases over time, that about 320,000 current smokers would attempt and be likely to quit as a result of all four increases, and about 40,000 teenagers would be deterred from taking up smoking. In the longer term that means tens of thousands of cancer deaths would be prevented …"
Another article reported Emeritus Professor Simon Chapman, from the University of Sydney's School of Public Health, as saying:
… tobacco control had been one of the great public health success stories of our time.
"Tobacco control is the poster child of chronic disease control," he said.
He explained that the tobacco excise worked like 'a vaccine against lung cancer'. He also said:
Price is the single most important factor in determining demand.
Now, this measure alone cannot reduce smoking rates.
Debate interrupted.