By Eric Crampton 12/10/2015

In a New Zealand that cared more about harms from tobacco use than about bashing tobacco companies, we’d expect to see things like:

  • Legal and simple access to nicotine cartridges for e-cigarettes. They could be accompanied by a very low excise tax and sold through licensed outlets, like tobacco, under an R18 regime, if the public health folks worried about sales of an addictive but relatively benign substance (coffee?).
  • A regime providing excise scaled to harms for different tobacco products. If heated rather than smoked products were less harmful, they should be available on a lower excise rate. And similarly for snus or for chewing tobacco.
Instead, what do we get? New Zealand gloating over that tobacco was exempted from investor-state dispute settlement provisions in the TPP, hints that more tobacco excise hikes are coming, and the Prime Minister noting that he’d like to implement tobacco plain packaging.

Surely we’re well into massively diminishing returns on the bash-tobacco side. Why not put the effort instead into getting legal markets in less harmful alternatives with an excise regime that’s sensitive to the relative harms of the different products?

Sure, tobacco excise hikes will continue to cut down on the number of smokers; demand curves do slope downward, and especially in the longer term. But at current excise levels, the ones left are surely the least price sensitive. We know that the price elasticity of demand for products with close substitutes is much greater than the price elasticity of demand for products with no close substitute. And we know that the current regime is highly regressive for those households that continue to smoke.

Why not open up the market to less harmful substitutes? Isn’t it just a bit nuts that e-cigarette users have to import their nicotine capsules from abroad, where they have much harder recourse if they’re provided adulterated product?

0 Responses to “Tobacco targets”

  • Then put on a fairly trivial excise (relative to the excise charged on tobacco) and let it be sold here. It seems odd that we have a quasi-ban on something far less harmful than smoked tobacco.