Reducing harm or barking at cars?
If the Government genuinely wants people to switch from smoking to new, less harmful alternatives it needs to review its regulation and taxation regime, argues Eric Crampton of the New Zealand Initiative.
There’s an old joke about the neighbourhood dog that loved to chase cars down the road – what would it ever do if it caught one?
The Government has been a bit like that with tobacco harm reduction. A very promising car has come around the corner and stopped. And the puzzled dog is standing there growling at it.
For decades, government has wanted to reduce smoking rates. Why? Smoking causes cancer, myriad respiratory problems, and shortens lives.
To reduce smoking, government used the tools it had at hand – which have gotten some of the job done, even if it was at a cost.
Tobacco excise collects at least three times more in tax than smoking costs the health care system. The 2001 McLeod Tax Review found the relatively low excise rates then in place to be indefensible – if their purpose was to compensate the Government for smoking’s cost to the health care system. Background documents for the Cullen tax review suggested that continued excise hikes would do relatively little to further reduce smoking rates, while imposing substantial regressive burden on poorer communities that continue to smoke.
Plain packaging regulations with graphic warnings may discourage kids from starting smoking, but the evidence is weaker than you might hope: SmokeFree regulations have made smokers pariahs, increasingly barred from places where decent people might witness their habit.
Even though smoking rates have declined, nothing suggests that current policy will achieve the Government’s goal of getting smoking down to less than 5 percent of the population by 2025.
And so we come to the promising car that has come around the corner – new and safer ways of accessing nicotine.
Spend any time walking around a downtown urban centre and you will notice the clouds of vapour coming from former smokers who have switched to a less harmful alternative. Rather than berating smokers for their habit, vaping offered a way of delivering nicotine without combustion’s nasty consequences.
But vaping is hardly the only alternative out there.
Nicotine gum and patches have long been prescribed as stop-smoking solutions, but simply haven’t worked for a lot of smokers trying to quit.
Swedish snus is a powdered tobacco contained in a small sachet that looks like a teabag; users place the sachet behind their lower lip. Snus is far safer than smoking or traditional chewed tobacco, has been an important part of Sweden’s decline in smoking rates since the 1980s, but has only recently became available in New Zealand. And new technology that heats tobacco rather than burn it, and consequently avoids creating the carcinogens that come with combustion, is now on the market too.
There have to be a wide variety of options available for people wanting to cut down or quit smoking because different things work for different people. And making that work requires regulatory and tax frameworks that are fit for purpose rather than refitting those designed for cigarettes.
Last week’s headlines told us Philip Morris offered to stop selling cigarettes in New Zealand if it received a tax break – along with a rather smug reply from the Prime Minister that the company could feel free to stop selling cigarettes any time it liked and shouldn’t need a tax break to do it.
But the reporting really missed what has been going on.
Philip Morris makes one of the newer reduced harm products. Its Iqos device heats non-combustible tobacco rather than burn it. Iqos is less harmful than smoking, but perhaps not quite as safe as vaping – the science is still being settled on that one. Nevertheless, ‘heets’ (the tobacco sticks used in Iqos) face the same tobacco excise rate as cigarillos. Excise on cigarette tobacco is just over $1,300 per kilogram or about $0.92 per cigarette. Excise on other tobacco products, from cigars and cigarillos to snus and ‘heet’ sticks, runs just over $1,150 per kilogram of tobacco.
In every other aspect of tobacco control policy, the Government has been adamant that price is an effective deterrent. That is why it imposes excise taxes that cost a pack-a-day smoker more than $6,700 per year, despite the regressive effects of that tax regularly highlighted in Statistics New Zealand’s inflation updates.
If the Government wants people to switch from smoking to less harmful alternatives, why does it impose the same tax on combustible tobacco as on tobacco that is used less harmfully? A 10-gram packet of snus selling for $21, containing 15 sachets, draws about $11.50 in excise – or about $0.77 per sachet. A 10-gram packet of cigarillos would draw the same excise.
It gets worse. Iqos sticks are subject to smoked tobacco’s plain packaging rules with graphic warnings about the dangers of cigarettes. It could well be worth having a warning on the packs that while they are safer than cigarettes, they aren’t candy. But how does it encourage uptake of reduced-harm alternatives if their packages look just as dangerous as the actually dangerous products?
The dog just does not know what to do with the car it has caught, so it sticks to what it knows – growling. When the Prime Minister quipped that Philip Morris could simply stop selling cigarettes here, she absolutely missed the point. Other cigarette companies would fill the gap in the market. But if reduced-harm products had a greater price advantage over cigarettes through a risk-proportionate excise regime, more smokers overall might switch.
Vaping is a really important part of tobacco harm reduction. But it is not a solution that will work for all smokers. Making sure the regulatory regime is right for other reduced-harm products matters. That means a much lower excise rate for reduced-harm tobacco products – or even zero excise through 2025 – and a bit of sanity in the rules around product packaging.
The New Zealand Initiative, of which Dr Eric Crampton is chief economist, is an independent think tank funded by the subscriptions of more than 70 corporate members, including Philip Morris.