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 articles1 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Critics claim that these articles are either about different products, outdated, or not decisive on the benefits of HTPs – thereby, only offering weak support for the Minister’s view that HTPs have a similar risk profile to vapes and could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 statement2 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 statement3, 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.
December 2023: Japan will raise the tax burden on heated tobacco
The Japanese Government is considering to raise the tax burden on heated tobacco4, bringing it to the same level as cigarettes, as part of a plan to finance the increased defense spending. The proposal could be included in the ruling Liberal Democratic Party’s tax reform outline to be released later this month. At the end of 2022, the Cabinet already approved a plan to increase the tobacco excise tax by ¥3/stick – resulting in ~¥200Bn ($1.4Bn) additional tax revenue.
In parallel to the increasing popularity of heated tobacco, Japan reformed heated tobacco taxation twice since 2018 – substantially reducing the tax advantage of the category vis-a-vis cigarettes: firstly, by defining a new tax category called “heat-not-burn tobacco” in 2018 (replacing the classification as a low-taxed “pipe tobacco”) and secondly, by implementing a pure specific excise tax system in 2022.
December 2023: Greece defines the tax rate for heat-sticks with no tobacco
At the 2023 Investor Day, PMI disclosed its intention to proactively engage with the authorities to set a tax for non-tobacco heatsticks even if it could be assumed that the product (PMI: LEVIA, BAT: veo, Imperial Brands: iSenzia) can be launched without an excise tax obligation as it does not fit into any existing (excisable product) categories.
In the revised tax bill5, Greece specifies a new category called “smoke-free electrically heated product” in addition to the already existing “electrically heated tobacco product” category. The new category is defined as a manufactured product, which does not contain tobacco, is intended to be inhaled by means of a heating process rather than combustion and contains nicotine (or nicotine substrate) and other nicotine-free substances (or other substances), in solid form, excluding products intended for medical and pharmaceutical use. Both categories are subject to an excise duty of €156.7 per kilogram.
Moreover, “nicotine pouches” are also defined as a new excisable product category: a manufactured product, which does not contain tobacco, is intended to be taken orally, without inhalation and without a heating or combustion process, and which contains nicotine (or nicotine substrate) and other substances, in solid form, excluding products intended for medical and pharmaceutical use. Nicotine pouches are subject to an excise duty of €50 per kilogram. The standard VAT rate in Greece is 24%.
References:
- 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 ↩︎
- https://www.yomiuri.co.jp/economy/20231212-OYT1T50109 ↩︎
- Tax bill: Imposition of excise duty on non-tobacco products | Proson ↩︎
