Policy Analysis

 

Smokers Health Fund (May 2016)

 

Introduction

Every year smoking claims 15,000 Australian lives and costs the economy $13.5 billion (Department of Health, 2015). A 10% tobacco levy has been proposed for a Smoker’s Health Fund, to help cover the cost of treating smoking-related illnesses. This policy needs to be evaluated in terms of its political feasibility, administrative considerations, efficiency and fairness; in relation to the needs of the government, the health sector and the smoking public. Based on this analysis we recommend that the Prime Minister promotes this levy as part of a wider strategy of preventing smoking rather than making smokers pay for their own treatment.

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The Government

 

Political

Further increasing tax on tobacco products is consistent with longstanding government policy. However, in light of the recent shelving of the current commitment to increase tax on cigarettes by 12.5% each year until 2020, the Prime Minster will need to be prepared to make a strong stand. Public opinion is favourable. Polls indicate that 67% of Australian’s support an increase in tobacco tax if the revenue is put towards health education and 68.6% support a tax to contribute towards medical treatment (Cancer Council & Heart Foundation).

 

Tobacco tax can raise significant funds, but it is a very unreliable source of income and must not be depended on to cover gaps in the government budget. The Australian Treasury has forecast that the current tobacco tax plan would raise $28.2 billion over 10 years, which is $19.8 billion less than Labor had estimated to cover its spending promises (SBS, 2016). This is a common mistake. In Ireland from 2012 to 2014 there was a total of €367 million shortfall in expected revenue from tobacco tax (The Journal, 2015).

 

Administrative

The collection of tax on cigarettes is complicated by the burgeoning illegal tobacco market, which is often seen to be encouraged by tax increases. Smuggling tobacco is an attractive option for organised crime groups because of the low risk and high profit (Australian Crime Commission, 2015). It is estimated that 14.3% of total consumption is slipping through tax-free and potentially increasing dangers from unregulated content (C&I Week, 2015).

 

The Health System

 

Efficiency

Although any extra funding for Australia’s healthcare system is beneficial, the significance of a Smoker’s Health Fund should not be overestimated. It would be concerning if significantly less money was assigned to the health budget based on the volatile funding from tobacco tax. The ultimate aim is to continue the trend of decreasing numbers of smokers, which will mean less money going into the fund, despite some health risks continuing many years after quitting (Krucik, 2013).

 

Administrative

It is difficult to ‘ring-fence’ funds raised from taxes. If this additional levy is promised to be put towards treatment or prevention, there needs to be a strong structure in place to channel this money.

 

Fairness:

Some taxpayers are frustrated that they support the excessively disproportionate healthcare costs of the 13.3% of the population who knowingly engage in the destructive behaviour of smoking (Department of Health, 2015). However this argument needs to be very carefully engaged with. The expectation that smokers should support their own burden, could move towards a system where patients are liable for healthcare related to any risky behaviour, such as sports.

 

Promoting an additional smoking levy as a way of funding related treatment could also raise questions about why the existing taxes are not already being put towards this. Over the last eight years of tax increases, no revenue has been assigned to tobacco-related healthcare services. (Reynolds, 2016).

 

The Smoking Public

 

Efficiency

Research suggests that a 10% tobacco tax increase in high-income countries would decrease smoking by around 4% (Bader, Boisclair & Ferrence, 2011). Studies of previous Australian cigarette tax increases show that smokers attempting to quit immediately rose from 13% to 22% (Dunlop, Cotter & Perez, 2011). As such it is likely that this proposed additional tax would continue to work towards decreasing the smoking population. This effectiveness in a way conflicts with the revenue-raising purpose of the proposal as it stands.

 

A smoking levy is only one approach and should be part of wider strategy including media campaigns. The enforcing of smoke-free workplaces can significantly reduce tobacco consumption (Fichtenberg & Glantz, 2002).  Adolescent smoking could possibly be cut by 18% if smoking was banned from PG-rated films (Sargent, Tanski & Stoolmiller, 2012).

 

Fairness

Taxing tobacco has raised accusations of discrimination. This can generally be dismissed on the basis that smoking is a choice, unlike gender, race or sexuality. What may be of concern however, is the regressive nature of the tax, which affects the poor more than the rich (Remler, 2004). Assigning money to treatment, rather than prevention, also runs the risk of the tariff appearing to be a ‘sin tax’ rather than a genuine measure to help smokers (Guppy, 2010).

 

Suggested Slogans

 

Government

We need to do our bit to help people quit.

This encourages ministers to view the tax as in the interest of the public, rather than as just another money-making venture. It also works as a pertinent soundbite.

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Health System

Australia’s smoking crisis: Prevention is the best cure.

The word ‘crisis' is a reminder of the scale of the problem. The reuse of the old healthcare idiom places the tax, and the programs it could fund, as consistent with the wider principles of the profession.

 

Smokers

Smoking burns holes in your lungs. Now it will burn holes in your paychecks too.

This rightfully positions the government’s concern for public health first. It then presents the tax as a strong incentive to quit. The burning metaphor is visual and easy to remember.

 

Conclusion

Based on this analysis we perceive the Smoker’s Health Fund levy as viable. However to suit the purposes of not just the government, but also the health system and the smoking public, the revenue needs to be put towards smoking prevention and promoted as part of a wider strategy. To focus on the tax as a way of funding healthcare would be both politically and morally fraught.

 

 

References:

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Australian Crime Commission. (2015). Organised crime in Australia. Retrieved from:

https://www.crimecommission.gov.au/sites/default/files/FINAL-ACC-OCA2015-180515.pdf

 

Bader, P., Boisclair, D. & Ferrence, R. (2011). Effects of tobacco taxation and pricing on

smoking behavior in high risk populations: A knowledge synthesis. International Journal of Environmental Research and Public Health, 8, 4118-4139. http://dx.doi.org/10.3390/ijerph8114118

 

C&I Week. (2015). Illegal tobacco market booming. Retrieved from:

http://c-store.com.au/2015/11/19/illegal-tobacco-market-booming-in-australia/

 

Cancer Council & Heart Foundation. (n.d.). Taxation reform and tobacco excise: Best

practice for a sustainable future. Retrieved from: http://www.cancer.org.au/content/pdf/CancerControlPolicy/Submissions/Tax_review_submission_JAN09.pdf

 

Department of Health. (2015). Tobacco key facts and figures. Retrieved from:

http://www.health.gov.au/internet/main/publishing.nsf/Content/tobacco-kff

 

Dunlop, S.M., Cotter, T.F. & Perez, D.A. (2011). Impact of the 2010 tobacco tax increase

in Australia on short-term smoking cessation: A continuous tracking survey. The Medical Journal of Australia, 8, 469-472. http://dx.doi.org/10.5694/mja11.10074

 

Fichtenberg, C.M. & Glantz, S.A. (2002). Effect of smoke-free workplaces on smoking

behaviour: Systematic review. British Medical Journal, 325, 1-7.

 

Guppy, P. (2010). Lawmakers cannot count on sin taxes for budget relief. Washington

Policy Centre. Retrieved from: http://www.washingtonpolicy.org/library/docLib/Jan._2010_SinTaxPN.pdf

 

Krucik, G. (2013). What happens when you quit smoking? Healthline. Retrieved from:

http://www.healthline.com/health-slideshow/quit-smoking-timeline

 

Remler, D.K. (2004). Poor smokers, poor quitters, and cigarette tax regressivity.

American Journal of Public Health, 94, 225-229.

 

Reynolds, E. (2016). Illegal tobacco industry flourishing in Australia as government hikes

taxes. News.co.au. Retrieved from: http://www.news.com.au/finance/economy/australian-economy/illegal-tobacco-industry-flourishing-in-australia-as-government-hikes-taxes/news-story/c1d28c0a1919d0fbcc499579a2386b28

 

Sargent, J., Tanski, S. & Stoolmiller, M. (2012). Influence of motion picture rating on

adolescent response to movie smoking. Pediatrics, 130, 228-236. http://dx.doi.org/10.1542/peds.2011-1787

 

SBS. (2016). Budget 2016: $20 billion shortfall in smoking tax revealed. Retrieved from:

http://www.sbs.com.au/news/article/2016/05/02/budget-2016-20-billion-shortfall-smoking-tax-revealed

 

The Journal. (2015). Does raising tax on cigarettes actually work? Retrieved from:

http://www.thejournal.ie/tobacco-excise-cigarette-tax-ireland-2370102-Oct2015/