July 2025: Heated tobacco product tax cut is extended by two years
The tax break for heated tobacco products is extended for two years in New Zealand. In July 2024, the Government reduced the excise tax on heated tobacco by 50% for one-year trial subject to an evaluation. The aim of the tax reduction was to encourage smokers to switch from cigarettes to heated tobacco through lower prices. However, the Associate Health Minister confirmed that the evaluation will be done in July 2027 and the reduced tax rate will apply to heated tobacco at least until then.
Philip Morris International (PMI) is the only company present in the heated tobacco category in New Zealand with its IQOS device. Tax cut trial will be extended as PMI had to pull its IQOS device from sale in October 2024 due to the non-compliance with the removable battery requirement for electronic nicotine delivery devices. Consequently, cheaper heated tobacco products were only available for two months in the one-year trial period and a sufficient amount of data was could not be gathered for an evaluation. Moreover, the requirement for removable batteries is recently ditched by the Government to resolve a legal action from a vape store chain – which renders the removal of IQOS from the market unnecessary.
October 2024: Philip Morris International (PMI) will launch compliant IQOS devices in New Zealand
Philip Morris International (PMI) announced that they will soon make available an enhanced range of smokefree devices – IQOS and potentially VEEV – in New Zealand, meeting all new regulatory requirements. Meanwhile, existing consumers can continue to use their current IQOS device and access a range of smokefree consumables in retail.
October 2024: Philip Morris International (PMI) pulls IQOS from sale in New Zealand
Philip Morris International (PMI) is forced to pull IQOS from sale in New Zealand following the regulatory change which became effective on October 1, 2024. From this date on, Electronic Nicotine Delivery Systems (ENDS) – including IQOS – should have removable batteries and child safety mechanisms. IQOS is not compliant with the new ENDS rules. PMI also withdrew VEEV ONE disposable vape from sale for the same reason1.
PMI is a monopoly in the heated tobacco market in New Zealand with its IQOS device; with the removal of IQOS from the shelves, no heated tobacco device is currently left on the market in New Zealand. PMI informed its distribution partners that IOQS is unavailable for purchase due to a regulatory change on 1 October 2024 affecting vaping devices. It is not clear when compliant IQOS devices will placed on the market. Meanwhile, heatsticks are still available for purchase at the retail for the existing IQOS users.
IQOS has been at the center of political controversy since the New Zealand Government cut the excise rate on Heated Tobacco Products (HTPs) by 50% in July 2024 (for a trial period of 12 months) in order to reduce the cost and increase the attractiveness of HTPs as a smoking alternative. The stated objective was to have more than 7000 people switch to HTPs as part of the Smokefree 2025 plan. Being the only player in the New Zealand heated tobacco market, PMI emerged as the sole beneficiary of the tax cut while the Government set aside NZD216 million (US$136 million) to compensate the tax reductions.
Meanwhile, critics continue to question the power of tobacco lobbies in New Zealand following the abolishment of the Generational Tobacco Ban and reduction of the HTP. Uncovered documents reveal that PMI demanded the Government to “establish a tax rate for heated-tobacco products significantly below the tax rate for cigarettes” and NZ First Minister & Associate Health Minister Casey tried to have the “removable battery” regulations delayed for two years. However, the Cabinet only agreed to a six month delay from the original date of 21 March, 2024.
October 2024: Under political pressure, New Zealand’s Associate Health Minister releases the details of the independent advice on heated tobacco products that paved the way to the excise tax rate cut
The political pressure is mounting on the New Zealand’s Associate Health Minister following the heated tobacco excise rate cut despite the Health Ministry’s review of the available research which found “no compelling evidence of any benefit from the use of heated tobacco products”.
The Minister stated that she made the decision based on independent advice and released the details of the five articles2 that informed her:
– A 190-page report from Royal College of Physicians (2016) in the UK that does not specifically mention heated tobacco products (HTPs)
– A 2022 article from the International Journal of Environmental Research and Public Health (IJERPH), suggesting HTPs may help with smoking cessation, but the benefits are reduced if HTPs are used as a replacement for less-harmful vaping, and warns it could encourage non-smokers to use tobacco or lead former smokers to relapse
– A 2016 article (IJERPH) indicating the use of snus appears to facilitate smoking cessation in Sweden
– A 2020 article (IJERPH) about smoking patterns in Japan – where recreational use of nicotine vapes is not allowed – showing cigarette sales decreased after the introduction of HTPs
– A comment piece published in the Lancet.
Critics claim that these articles are either about different products, outdated, or not decisive on the benefits of HTPs – thereby, only offering weak support for the Minister’s view that HTPs have a similar risk profile to vapes and could work as a smoking cessation tool.
Meanwhile, the only company present in the New Zealand heated tobacco market, Philip Morris International (PMI), released a statement3 noting that the claim of a loss of NZ$216 million government revenue from the recent heated tobacco tax change is a gross miscalculation and HTPs yielded only around NZ$6 million in excise taxes in FY23. PMI also underlined that HTPs are smoke-free alternatives and the e-cigarettes, which make up ~98% of the smoke-free product sales in New Zealand, pay no tax at all. In other words, IQOS is deeply unpopular in New Zealand (a country where there are more vapers than smokers) despite PMI’s outsized investments in this highly lucrative market.
July 2024: New Zealand cuts heated tobacco excise tax rate by 50%
New Zealand cut the excise rate on Heated Tobacco Products (HTPs) by 50%, effective from July 2024, in order to reduce the cost and increase the attractiveness of HTPs as a smoking alternative. In a statement4, the Customs Minister (also the Associate Health Minister) stated that vaping had been a successful quit-smoking tool and the excise rate reduction would help test whether HTPs would also be a useful cessation device.
Philip Morris International (PMI) has lobbied for a cut to the excise tax on HTPs, calling on the government to “establish a tax rate for HTPs significantly below the tax rate for cigarettes”. Tax rate cut is against the advice from the Ministry of Health, which states that there is no evidence on HTPs helping people to quit smoking and it is not recommend to liberalize the way HTPs are promoted.
The Customs Minister is also considering whether allowing the sale of oral nicotine products, such as snus and nicotine pouches, could help achieve the Smokefree 2025 goal. The Ministry of Health is against the extension of the range of nicotine products available for sale in New Zealand due to the risk of increased nicotine addiction among the youth. British American Tobacco (BAT), which owns the Velo brand, has lobbied the government for the nicotine pouches to be legalized in New Zealand.
New Zealand is home to 280,000 smokers – corresponding to 7% of the adult population. Smokefree nation status is achieved when the adult smoking prevalence falls to 5% or less.
References:
- https://www.rnz.co.nz/news/in-depth/529583/casey-costello-s-tobacco-tax-cut-plan-stalled-as-device-pulled-from-shelves ↩︎
- https://www.rnz.co.nz/news/top/529782/casey-costello-releases-independent-advice-on-heated-tobacco ↩︎
- https://www.scoop.co.nz/stories/BU2410/S00052/statement-from-philip-morris-on-heated-tobacco-products-in-new-zealand.htm ↩︎
- https://www.rnz.co.nz/news/in-depth/522429/nz-first-minister-casey-costello-orders-50-percent-cut-to-excise-tax-on-heated-tobacco-products ↩︎
