24 November 2015
by Latika Bourke

Bill Shorten to confirm Labor plan to increase tobacco taxes

A packet of smokes will cost $40.00

Opposition Leader Bill Shorten will confirm on Tuesday that Labor would seek to increase taxes on tobacco if elected next year.

Three-quarters of the cost of a $40 packet of cigarettes would be tax under a future Labor government in a policy move Opposition Leader Bill Shorten will confirm on Tuesday.

Mr Shorten will on Tuesday confirm that, if elected next year, Labor will seek to increase taxes on tobacco a fortnight after Fairfax Media first reported the major policy decision.

The tobacco excise, which has been rising by 12.5 per cent a year since 2013 under the former Labor government, would continue to rise another four times each year until 2020 if the Opposition wins the next election.

Mr Shorten will say this means that by the end of the decade, 75 per cent of the cost of cigarettes in Australia would be tax.

The policy announcement was to be put to shadow cabinet for consideration on Monday night. Labor frontbenchers first learnt of the policy when Fairfax Media reported this month that the party was considering reaping another $40 billion from smokers over the next decade.

Parliamentary Budget Office figures say the four more 12.5 per cent excise increases, plus twice yearly indexation, would deliver the federal government $3.8 billion in extra revenue over four years. The measure is forecast to raise $47.7 billion over the decade or medium term.

Labor says that under the current policy settings, a pack of 25 cigarettes that costs $24.69 today would cost $29.91 in 2020 but its plan would see the pack cost $40.80.

Labor hopes to set its higher tobacco tax plan against Prime Minister Malcolm Turnbull's possible support for an increase to the Goods and Services Tax.

"The difference between Labor and the Liberals could not be starker," Mr Shorten is expected to say on Tuesday.

"Labor wants to reduce the number of people who smoke; Malcolm Turnbull's Liberals want to increase the GST and the cost of everything, including fresh food, school fees and going to the doctor."

Mr Turnbull has not ruled out broadening the base of the GST to include fresh food, health and education or increasing the rate, possibly to as high as 15 per cent from the present 10 per cent.

As Opposition Leader in 2009, Mr Turnbull proposed raising the tobacco excise to pay for the private health insurance rebate for the wealthy.

Labor adopted the measure and added extra excise increases as well as introducing plain packaging laws. Philip Morris Asia is challenging Australia's tobacco plain packaging legislation at the World Trade Organisation.

The tobacco companies claim higher cigarette taxes will lead to more illegal products being sold on the black market.