AUSTRALIA:Tobacco industry to take $440m tax slug

[Robert Weissman <rob@essential.org>]

Tobacco industry to take $440m tax slug

by MORGAN MELLISH
Sydney Morning Herald (1611) 
AUSTRALIA;
Date: Thursday, 2/4/99

Australia's three cigarette makers will be slugged with about $440 million
a year in extra tax under a new federal tobacco excise scheme announced
yesterday. 

The Federal Government expects that its new "per stick" excise will push
up the price of high-volume, low-weight cigarettes such as Horizon, More
and Holiday. The price of premium brands, such as Benson&Hedges and
Dunhill, is expected to stay the same. 

The Government estimates that the new tax scheme, which comes into effect
on November 1, will lead to additional revenue of $300 million in
1999-2000 and then $440 million in additional revenue each year after
that. 

The new tax system, which replaces a complex weight-based system, will
apply to cigarettes with a tobacco content of up to 0.8 grams. An excise
per kilogram of tobacco will apply to all other tobacco products. 

The Federal Treasurer, Mr Costello, said the Government would carefully
monitor the cigarette market to ensure manufacturers did not try to
offload budget cigarettes before the new taxes came into effect. 

"This reform has been recommended by health experts and is favoured by
most other countries," Mr Costello said. "It means uniform tax on each
cigarette and removes the ability to vary tax by adjusting price and
weight." 

Spokespersons for W.D&H.O Wills and Rothmans Holding said they would not
comment on the policy until they had reviewed it. 

London-based British American Tobacco, which owns 67 per cent of Wills, is
proposing to merge its subsidiary with Rothmans as part of a global deal. 

BAT has argued to the Australian Competition and Consumer Commission that
the new excises will lead to increased imports. 

However, BAT's argument has yet to convince the ACCC which is concerned
about the level of competition in the industry. 

The merger proposal will reduce the industry from three players to two -
Wills-Rothmans and Philip Morris - giving the merged entity 60 per cent of
the market. ------------------------------------------------------ 11:34
AM on 2/4/99