Evidence that tax increases are strongly associated with declines in smoking prevalence and tobacco consumption is overwhelming when the tax increase results in price increases to consumers. However, UK research suggests that tax increases are not being added to ‘discount’ brands as tobacco companies differentially shift tax increases between brand segments.
To examine the extent to which the January 2014 10% excise tax increase on tobacco in New Zealand (NZ) was passed on to consumers.
Price data were collected before and after the tax increase from a sample of NZ tobacco retailers, stratified by area deprivation. Four British American Tobacco brands were selected based on brand segmentation (premium, mainstream and value), together with one roll your own brand. The independent variables included the type of retailer, deprivation of the retail outlet location, proximity to a secondary school, if alcohol is sold, percentage of population aged under 19-years, and whether they were located in an urban or rural area.
A preliminary analysis of the price data at both time points showed that the mean difference in price from before to after the tax change was only 3% for the value brand (461 retailers). This contrasted with the mean of 9% for the premium brand (448 retailers), and 11% for both mainstream and roll your own brands (471 and 464, resp.). This is a preliminary result; further analyses are examining other possible contributing variables that may explain these findings.
Tobacco companies in NZ do not appear to be adding the full 10% tax increase to discount brands. The price of these brands remains low, creating a greater price gap between premium and discount brands. If NZ is to achieve its goal of being smokefree by 2025 then changes to the excise tax will be needed.