Australia is one of 174 signatories to the World Health Organisation’s Framework Convention on Tobacco Control, which also obligates nations to prohibit or restrict duty free tobacco sales. If incoming tourists and residents can’t buy cheap tobacco at airports, they will buy it in shops, taxed. The Henry review estimated that around $200 million foregone tobacco tax would flow to treasury as a result.
The tobacco industry has argued that incoming travellers will simply purchase their duty free supplies at foreign airports and bring them in. But this is easily countered by removing not only duty free tobacco sales but duty free import allowances.
I was in Singapore last week at the 15th World Conference on Tobacco and Health, and a Canadian speaker described how he had to pay $120 duty to bring in sample packs from around the world to display in his conference presentation. Singapore, along with Barbados and Sri Lanka, Nepal and Romania tax all incoming tobacco, even single packs. Hong Kong allows arriving passengers to bring in just 19 cigarettes tax free. The European Union removed duty free concessions for its residents travelling within Europe in1999. Another 11 nations set the duty free allowance at less than 80 cigarettes (four packs) while Australia is one of the world’s most generous, allowing each passenger 250 cigarettes.
The duty free tobacco concession was established long before governments understood that taxing tobacco was one of the surest ways of achieving the twin goals of reducing tobacco use and raising revenue. Many are cynical that tobacco tax is simply an easy and – with only 15 per cent of voters now smoking – popular way of raising revenue. But the tobacco industry’s internal documents are frequently candid about the role of tax in driving down consumption. For example, two Philip Morris memos state “A high cigarette price, more than any other cigarette attribute, has the most dramatic impact on the share of the quitting population” and “the most certain way to reduce consumption is through price.”
Preserving the duty free travel perk is completely incoherent with government policy on tobacco control. It encourages smokers to buy up, including lighter smokers who are enticed to buy more than they would normally by the cheap prices. It also associates tobacco with the thrill of international travel and holidays and with luxury goods like watches, high end spirits and wines, electronic goods and perfume.
Objections can be expected that ending duty free tobacco might act to deter Asian male tourists from nations with high smoking rates (China, Japan, Korea). Those empty threats were made against every nation that banned smoking in restaurants and bars, but came to nothing. It is a rare airline that allows smoking today and stereotypes about places like China having no restrictions on smoking are dated: all public transport, many offices and an increasing number of restaurants in China are smokefree today.
Of course the same argument about loss of revenue applies to duty free concessions for sales of all goods you find in duty free shops. But no government seems likely to play Scrooge any time soon on that one. But removing tobacco from duty free sales and imports would be popular, promote health, raise revenue and provide policy coherency. As Wayne Swan prepares this year’s budget, this historically archaic anomaly should be an easy and sensible target. The only people who will squeal are Big Tobacco and the duty free companies, including the Nuance Group chaired by Nick Greiner, former chairman of British American Tobacco.