New Australian Tobacco Regulations And Proposals

April 2009

Australia is one of the most advanced countries in the world in terms of tobacco regulation.  Regulation is a legitimate means by which governments can help address health concerns around tobacco use.   


Australian tobacco manufacturers and retailers support proven, effective regulation of the manufacturing, sale, marketing and use of tobacco products.  However, many do not support regulation that hinders their ability to compete in the legitimate tobacco market, or regulation designed to prevent adults who wish to buy and use tobacco products from doing so.  
In 2010, tobacco manufacturers and retailers will be dealing with a number of regulatory changes.  For example, ACT, NSW and WA will be implementing tobacco retail display bans this year with TAS and VIC to follow at the start of 2011. 

Additionally, Reduced Fire Risk (RFR) cigarettes are currently being introduced across Australia.  
On top of this there are new proposals to mandate plain packaging for cigarettes, and to drastically increase tobacco excise tax.    
The Federal Government through the Australian Competition & Consumer Commission (ACCC) has developed a mandatory standard and regulation for what they call ‘Reduced Fire Risk’ (RFR) cigarettes.  RFR compliant cigarettes are more likely to extinguish when left unattended.  Packs of RFR compliant cigarettes will display a government legislated statement*:

 Key dates
  

•    23 March 2010 – All cigarettes manufactured and imported into Australia must be RFR compliant
  

 •    23 September 2010 – All cigarettes sold in Australia must be RFR compliant
 
 

What does it mean for retailers and the trade?
    

•    Retailers should ensure that all non RFR cigarette stock is sold by no later than 23 September 2010.  (Fines of up to $1 million may apply for non-compliance).
    

•    Being prepared to respond to questions on RFR cigarettes in the event that customers ask about them.  Some key points to familiarise yourself could be:
    

         ◦    The Federal Government through the ACCC has approved regulations requiring the mandatory standard for RFR cigarettes
   

         ◦    RFR cigarettes are designed to more readily self-extinguish if they are not puffed
    

         ◦    RFR compliant cigarettes are not ‘Fire Safe’
    

         ◦    Smokers need to ensure their cigarettes are completely extinguished before they are carefully disposed of.
 


Plain packaging

The Federal Minister for Health is currently considering a proposal from the National Preventative Health Taskforce to mandate plain packaging for tobacco products.   
The Senate has also ordered an Inquiry into a Bill introduced by Senator Steve Fielding that proposes requiring all tobacco products be sold in plain packaging.  Submissions to the Senate Inquiry are due by 26 February 2010 and the Senate Committee is scheduled to report by 17 March 2010.   
Plain packaging has not been implemented anywhere in the world and there is no evidence to support the opinion that plain packaging reduces smoking prevalence. Plain packaging will unnecessarily impact retailers who are already facing significant regulatory burden, in particular those, implementing store changes to comply with new tobacco display bans.   
Plain packaging will fuel the existing illicit tobacco trade - nothing would make counterfeiters’ jobs easier than requiring standard, generic packages.  Plain packaging will result in competing on price alone.   Lower prices and margins are not good for business and do not advance public health objectives.
 
Tobacco excise tax

There have recently been a number of proposals and ensuing debate around tobacco excise tax increases.  The NPHT proposes an immediate 29.5% increase to ensure that the price of a packet of 30 cigarettes increases to $20.  The Federal Opposition’s current policy is to increase excise tax by 12.5% as outlined in their budget response speech in May 2009.  The current review by Ken Henry of the Australian tax system is also addressing tobacco excise tax.   
The World Health Organisation recognises Australia’s current excise tax system as a world best practice.  Currently in Australia, excise tax increases occur every six months in line with CPI.  This system effectively provides certainty for business and allows the Government to achieve both its fiscal and health objectives. 
If there is an sudden and significant increase in tobacco excise tax, retailers may be negatively impacted through consumer downtrading to cheaper cigarettes and an increase in illicit trade (as has been the experience in other places such as the UK and Singapore after a tax hike) Neither of these consequences will help the Government achieve its health objectives.



 * Trade Practices (Consumer Product Safety Standard) (Reduced Fire Risk Cigarettes) Regulations 2008