10 November 2015
by Latika Bourke

Labor to raise tobacco taxes, again, to pay for Gonski reforms

Smokers would be hit by another series of tax increases under the Labor plan.

Labor is planning to raise taxes on cigarettes if elected to pay for the so-called Gonski education reforms, potentially pitting a slug on smokers against any Coalition plan to increase the GST rate or impose it on fresh food.

Sources have said that the federal opposition is considering another round of three 12.5 per cent increases, which sources said would net $40 billion over 10 years. The increase would push up the cost of cigarettes in Australia to well beyond $1 per stick, making Australia's tobacco among the most expensive in the world.

The tobacco excise was last increased in September of this year and is due to go up another 12.5 per cent in September 2016 on top of indexation.

Labor leader Bill Shorten has in recent days been promising to fund the remaining years of Gonski funding, which the Coalition says the previous Labor government left unfunded to the tune of $30 billion. But the opposition has not revealed how it intends to pay for the school-funding increase.

Labor's education spokeswoman Kate Ellis said last week: "what we've said is that we supported Gonski in government, we found ways to prioritise finding the funding for it in government, and we remain supportive of it today".

Opposition frontbenchers Tanya Plibersek, Chris Bowen and Kate Ellis during question time.

In Labor's last term of government, former treasurer Chris Bowen announced he would increase the tobacco excise every year beginning 2013 for four years, raising $5.3 billion. This policy was supported by the Coalition in opposition and began taking effect after Tony Abbott won office.

On its website, the Department of Health says increasing the cost of cigarettes reduces their consumption.

"Increasing tobacco prices, through taxation, is one of the most effective measures that governments can take to reduce premature death and disease due to smoking."

The tax increase on tobacco would raise $40 billion over 10 years.

The revelation means Labor will go to the next election vowing to slug smokers to pay for the education of the country's children, while Mr Turnbull could potentially be arguing for increased consumption taxes that would affect all Australians.

Labor opposes any increase to the GST because it is regressive, meaning those on lower incomes are forced to pay more of their income on taxes, compared to the well-off.

The Coalition has said it wants to reduce the income tax burden for all Australians, possibly in exchange for an increase to the consumption tax.

Under Labor questioning on Monday about how it planned to compensate carers and veterans under any increased GST, Mr Turnbull called on the opposition to reveal its own tax plans.

"What are the Labor Party's proposals to deal with the massive deficit that they left us? The tens of billions of unfunded commitments?" Mr Turnbull said.

Former Labor strategist Bruce Hawker told Sky News on Monday that Labor polling under the second Rudd government in 2013 found it could have increased cigarette taxes further than it did.

"Polling that was done subsequently showed that you could have increased it even further and the Australian elector was very, very sympathetic to the argument that as long as that money essentially went to a good cause then it would get a sympathetic response from the electorate," he said.