Submission by Imperial Tobacco Australia Limited (PDF 600 KB)

More documents

Recommendations

Info

December 2006, a one Australian dollar increase in price was associated with a decline in prevalence of 2.6 per cent among low income groups compared with a 0.2 per cent decline among high income groups.‟ (p 24). There is no evidence to suggest that these consumers stopped using tobacco, as opposed to substituting legal tobacco products with illegal tobacco. High price elasticity means that low income consumers are more likely to substitute expensive legal cigarettes for cheaper, illegal alternatives. Given that this group is one of the target areas for health assistance from the government, we submit that the risk of illegal product substitution is something the government should consider very seriously before further increasing taxes. ITA strongly believes that a key area for government policy should be reducing illicit trade in tobacco. ITA submits that the consultation paper inappropriately emphasises increased prices of legal products without directing adequate resources to stemming trade in illegal products. Before any further price-related action is taken in relation to legal tobacco products, the government should target all available resources towards stemming the growth of illicit, unregulated tobacco products. An approach targeting the growth of illicit trade (which is unaccountable for its products and actions), not one further restricting already accountable legitimate traders is warranted here. This approach would be in line with the Framework Convention on Tobacco Control as well as international best practice. In addition to these general concerns, there are a number of more specific Part 6 action items that cause ITA serious concern. 4.1 Action Item 6.2.5 ITA is strongly opposed to minimum pricing or price discounting restrictions, on the basis that both are anti-competitive. ITA‟s brand portfolio is comprised of many brands which belong to the “value” sector of the Australian tobacco market. If a minimum price were imposed, the Government would significantly lessen competition in the market place and thereby remove consumer choice. Due to the significant excise and/or duty already imposed in Australia, there is effectively a minimum cost to manufacture or import and then sell legitimate tobacco products. If a higher minimum price for cigarettes were to be mandated, the Government would give larger manufacturers a significant advantage in the market place, seriously disadvantaging ITA with its “value” brands, and make it impossible for new market entrants to compete. ITA notes that it entered the Australian market in 1999, in response to competition concerns raised by the Australian Competition & Consumer Commission (ACCC), following the global merger of Wills & Rothmans. The majority of brands sold by ITA today were brands divested to it, following the approval of the ACCC. Accordingly, ITA considers the preservation of a legitimately competitive marketplace to be of great importance to government, to manufacturers, to retailers and ultimately to consumers. Price competition is a fundamental aspect of business competition. Adult consumers have the right to choose between legitimate competing products in an economic environment in which there is healthy competition between businesses. This allows consumers to select between a range of products and differentiate between products on the basis of comparative quality and price. Minimum pricing would result in a race to the bottom in terms of manufacturing quality and reduce competition between legitimate businesses. 4
The imposition of minimum pricing would also disadvantage small retailers, as it would remove one of the legitimate avenues by which smaller retailers can compete with larger ones. For the same reason, it would also be anti-competitive. Further, minimum pricing of a legal product will only exacerbate illicit trade. Price is one of the main reasons why people buy illicit product, as highlighted by the recent Deloitte report. Furthermore, it would be a misguided and naïve policy to think that minimum pricing would reduce illicit trade, as those who import and who sell illicit product are criminals, often associated with organised crime. These groups do not obey the law, they do not pay excise or duty and will not be bound by mandated pricing requirements. 4.2 Action Item 6.2.8 We support government efforts to prevent the illegal importation, supply and cultivation of tobacco in Australia and believe that this should be at the forefront of government efforts to improve public health. We believe that anti-illicit trade measures such as Track & Trace and Codentify® are useful tools that deserve increased government attention and support. These measures will be precluded under the tobacco plain packaging regime, as they rely upon the presence of visible markings that can be seen by retailers and consumers to verify authenticity. We note that some of the other most effective systems for identifying and preventing illicit trade are precluded by the introduction of plain packaging legislation, for example, the ability to include complex branding or insignia on the surface of cigarette packages. If the tobacco plain packaging legislation remains in its current form and is implemented from December 2012 as intended, it is vital that the government invests in policy measures to prevent the counterfeiting and smuggling of illicit tobacco products. 4.3 Action Item 6.2.10 ITA is opposed to any further regulation of the international Duty Free sector. Duty free sales account for less than 1% of tobacco sales in Australia. Duty free tobacco products are sold to existing adult smokers, who would otherwise purchase duty-paid tobacco products. In this context, there can be no suggestion that duty free tobacco sales are related to smoking incidence. As outlined in the April 2012 Deloitte report Assessment of removing inbound duty free allowances for tobacco, any plan to further reduce Duty Free sales of tobacco would have a significant negative operational and economic impact on Duty Free businesses and the broader tourism industry in Australia while delivering minimal upside to the Government. The government has only recently announced new measures which will come into effect from 1 September 2012 and we urge the government to assess the impact of these changes before undertaking further policy reform in this area. 5 PART 6.5 Priority Area 5: Eliminating Remaining Advertising, Promotion and Sponsorship of Tobacco Products ITA is of the view that the current form of the Tobacco Advertising Prohibition Act 1992 (Cth), together with complementary state and territory legislation that restricts the sale of 5
Page 1 and 2: SUBMISSION MADE BY IMPERIAL TOBACCO
Page 3: figures set out below, ITA would ch
Page 7 and 8: disclosure requirements would invol
Page 9 and 10: 5.5 Action Item 6.5.11 ITA does not
Page 11 and 12: PART 6.7 Priority Area 7: Reducing

Submission by Imperial Tobacco Australia Limited (PDF 600 KB)

Create successful ePaper yourself

Delete template?

Save as template?