New Zealand Extends Tax Cut for Heated Tobacco Products Despite Health Concerns

What was initially supposed to be a one-year tax cut for heated tobacco products (HTPs) in New Zealand has now been extended for an additional two years, sparking controversy and concern among public health advocates.

The tax reduction, which slashed HTP excise duties by 50%, was introduced in July 2024 as a trial, with an evaluation scheduled for the following year. However, the evaluation has now been pushed back to July 2027, with the reduced tax rate applying until then. The decision was made by NZ First’s Associate Health Minister, Casey Costello, who argued that the market disruption caused by the withdrawal of HTPs from the market last year made the original evaluation timeline impractical.

Philip Morris, the manufacturer of the IQOS device, was the primary beneficiary of the tax cut. However, the company had to withdraw its product from the New Zealand market in late 2024 due to non-compliance with new safety regulations, particularly the requirement for removable batteries. This withdrawal left HTPs unavailable for over five months of the original 12-month trial period, making the initial evaluation difficult to conduct effectively.

Labour’s health spokesperson, Ayesha Verrall, criticized the extension of the tax cut, calling it a misallocation of resources in a time of crisis for the health system. She argued that the government has the wrong priorities by providing tax breaks to a company whose products are not proven to be significantly safer than traditional cigarettes.

Despite the government’s claims that the tax cut could encourage smokers to switch to HTPs, health officials had previously warned that there was no evidence to support the claim that HTPs are effective in reducing smoking rates or are significantly safer than cigarettes. The Ministry of Health (MOH) also noted that it would be difficult to assess whether HTP use has led to a reduction in harm, as it cannot track whether users moved from safer alternatives like vapes to more harmful HTPs.

Further controversy surrounds the decision, with leaked documents suggesting that Philip Morris may have lobbied NZ First to shape legislation in its favor. The documents, obtained through litigation, allege that Philip Morris provided draft legislation to NZ First as part of a broader lobbying campaign.

The extension of the tax cut also comes at a significant financial cost, with the Treasury estimating that continuing the policy until 2029 could cost up to $293 million. This has raised concerns about the government’s commitment to public health when allocating such a large sum to a single company.

Health advocates and organizations, including the Health Coalition Aotearoa and Vape-Free Kids, have called for the government to reconsider the decision, urging Prime Minister Christopher Luxon to reassess the allocation of the tobacco and vaping portfolio. They argue that the policy not only fails to protect public health but also risks normalizing the use of harmful products among young people.

As the evaluation date moves further into the future, the debate over the effectiveness and ethics of the tax cut continues to intensify. With no clear evidence of benefit to public health and significant financial implications, the decision has become a flashpoint in the ongoing discussion over tobacco regulation in New Zealand.