25 June 2012
Attention: Draft NTS 2012 submission
Draft NTS 2012
Healthcare Management Advisors
PO Box 1311
Fitzroy North VIC 3068
The Alliance of Australian Retailers Submission to the Consultation Draft
National Tobacco Strategy [2012-18]
Thank you for the opportunity to comment on the Consultation Draft National Tobacco Strategy [2012-18]
(Draft Strategy).
The Alliance of Australian Retailers Pty Ltd (AAR) together with its member associations comprising the
Australian Newsagents’ Federation Ltd, National Independent Retailers Association and the Service Station
Association Pty Ltd represents around 15,000 individual small retailers around Australia. The AAR’s
member associations represent independent service stations and convenience stores, newsagencies, milk
bars and local corner stores on issues relating to the retail sale of tobacco products.
The AAR supports the goal “to improve the health of all Australians by reducing the prevalence of smoking
and its associated health, social and economic costs, and the inequities it causes.”1
The AAR supports evidence-based measures to reduce smoking in the community - but is opposed to
measures that will unfairly impact on small retailers and policy outcomes that will do nothing for public
health but exacerbate the increasing trade in illicit tobacco and shift business to the large supermarkets.
The AAR will focus its comments on the Draft Strategy’s proposed actions in relation to tobacco excise tax
increases, eliminating remaining advertising, promotion and sponsorship of tobacco products and licensing
and availability and supply of tobacco products.
Tobacco excise tax increases
The Draft Strategy proposes to “Continue to implement regular staged increases in tobacco excise as
appropriate, to reduce demand for tobacco.”2
The Federal Government already does this by implementing two tobacco excise tax increases in February
and August every year - and we support that. However, we do not support additional excessive tobacco
excise tax increases on top of that, as was the case with the 25% increase on 30 April 2010. The AAR
submits that when cigarettes become significantly more expensive, consumers will simply look for cheaper
products or turn to the black market. Since the 25% increase on 30 April 2010, our members have
observed a shift to consumers downgrading to cheaper tobacco products. Large tax increases clearly run
counter to the goals of reducing smoking in the community and of preventing and minimising the illicit
trade of tobacco in Australia.
According to research, low income consumers have a higher price elasticity than high income consumers.3
Therefore, low income consumers are the first to look for more affordable alternatives if cigarette prices go
up, and are therefore more likely to switch to cheap illicit products.
1
Consultation Draft National Tobacco Strategy [2012-18], p. 5
Ibid, p. 25
3
“Under the Counter & Over the Border: How Government Inflames the Illicit Cigarette Trade”, Dr Patrick Basham, The Democracy Institute,
February 2010
2
Smuggling and counterfeiting benefits no one but the criminals involved, creating a market that is
uncontrolled and unaccountable. As a result, the government is deprived of tax revenue (approximately
$1billion4) and the livelihoods of many small businesses are threatened.
It is well documented that the illicit tobacco trade is a growing problem in Australia. A recent report by
Deloitte published in May 2012, found that illicit tobacco’s share of the market is the equivalent of
approximately 13.4% of the total market.5 The report also found that “there appears to have been a
structural change in the illicit tobacco market with survey respondents reporting a marked change from
purchasing unbranded tobacco to purchasing counterfeit and contraband tobacco.”6
The AAR submits that there is no public health benefit in measures which result in consumers shifting from
buying tobacco products from legitimate small businesses to instead buying unregulated and illegal tobacco
from the black market – not to mention the fact that the illicit tobacco is much more likely to get in the
hands of young people. Opening the door wider for the growing trade in illicit tobacco just makes it harder
for honest retailers to compete in the Australian market. Legitimate retailers check ID – criminals do not.
Advertising, promotion and sponsorship of tobacco products
The Draft Strategy states “several issues are still to be addressed to eliminate the remaining advertising,
promotion and sponsorship of tobacco products in Australia”7, and identifies payments and incentives to
retailers as areas for further regulation.
Our members are committed to selling tobacco products responsibly, within the regulations and
requirements of state and federal laws – our members take their responsibilities seriously. They operate
legal businesses, sell a legal product and are therefore entitled to engage in ordinary commercial activities
with their suppliers. Tobacco advertising in Australia has been banned for many years. We believe that
measures to restrict or ban ordinary business activities, such as payments to retailers are unreasonable and
unnecessary. The AAR submits that ordinary business activities between our members and their suppliers
have no impact on consumers, therefore any measures to restrict this will not result in a reduction in
smoking rates. Instead, such a measure will increase the financial burden placed on our members and
make it more and more difficult to compete with the large supermarkets. Coupled with the recent
additional cost burden on our retailers’ businesses as a result of point of sale display bans in all States and
Territories and the introduction of plain packaging later this year means that our members who are already
doing it tough in difficult and uncertain economic times will be put under further strain.
Availability and supply of tobacco products
The AAR supports licensing requirements for all retailers of tobacco products – licensing is an effective way
of ensuring that retailers comply with laws. Failure to do so should result in fines and/or revocation of a
licence to sell tobacco products. Given the current nature of the tobacco licensing system which varies
from state-to-state, the AAR would support a consistent and uniform national licensing system providing
that this does not place restrictive and unfair burdens on retailers and impose an anti‐competitive
disadvantage on some businesses and not others.
The AAR opposes placing controls on the number and type of tobacco outlets. There is nothing to suggest
that such a measure will lead to a reduction in smoking – consumers will simply buy their tobacco products
elsewhere, for example from a large retailer that can afford any onerous financial licensing burdens. A
scenario where a small retailer is prohibited from selling tobacco products, while another nearby can
continue to sell is unreasonable and unfair. Similarly, licensing scheme that place onerous requirements
4
“Illicit trade of tobacco in Australia: Report for 2011 – A report prepared for British American Tobacco Australia Limited, Philip Morris Limited and
Imperial Tobacco Australia Limited”, Deloitte, May 2012
5 Ibid
6 Ibid
7 Consultation Draft National Tobacco Strategy [2012-18], p. 33
and effectively excludes some small businesses from selling tobacco products would simply shift sales to
the large chains, without resulting in a public health benefit.
Conclusion
As long as tobacco remains legal to sell, purchase and consume, the AAR submits that small businesses
should not be punished for selling tobacco products by being subjected to unreasonable regulation that has
not been proven to demonstrate a public health benefit.
Alf Maccioni for and on behalf of
The Alliance of Australian Retailers Pty Ltd