Customs and Excise (Tobacco Products) Amendment Bill

I move, That the Customs and Excise (Tobacco Products) Amendment Bill be now read a second time.

The bill will combat the suspected underpayment of excise-equivalent duty on water-pipe tobacco and make a technical amendment to the Customs and Excise Act 2018 so that all tobacco excise continues to be annually adjusted for inflation. This is a short bill, barely more than a page, but it is important and it is urgent. The bill directly supports both the Government’s aim to reduce the harm from smoking and protect an important source of Government revenue. It will help New Zealand achieve its Smokefree Aotearoa 2025 Action Plan because, yes, even with a water pipe, users still inhale tobacco smoke, and we all know the personal tragedies that can result and the impact on our health system.

The bill will help Customs better oversee the importation of water-pipe tobacco and ensure that the correct amount of excise is paid. It does this by creating a new statistical unit based on the total weight of water-pipe tobacco; secondly, setting a new excise and excise-equivalent rate based on the current tobacco excise rate and tobacco content of 15 percent; and, thirdly, making water-pipe tobacco a prohibited import without a permit.

The bill will also protect excise revenue by ensuring that the correct rate of excise-equivalent duty continues to be paid on all tobacco into the future. The Customs and Excise Act 2018 provides that tobacco excise is annually adjusted for inflation. The provisions doing this refer to tobacco types by using international numerical descriptors. However, the latest international revision of those descriptors has created a new tariff heading. The Customs and Excise Act 2018 consequently needs updating. Without this update, the annual inflation adjustment would not apply to all those types of tobacco that it should.

You may ask why this bill needs to be passed with the urgency of Budget night legislation—from my colleagues in the ACT Party. Well, it is urgent because there is revenue at stake: (1) if announcements were made about proposed changes to the requirements for water-pipe tobacco, such is that which comes with a public consultation process, this would enable unscrupulous importers to import greater amounts and stockpile it to reduce the excise-equivalent duty they would pay; (2) the technical amendment updating the numerical descriptors needs to be in effect by 1 January 2023 when the next inflation adjustment will occur. Otherwise, we will have some tobacco not subject to the same excise and excise-equivalent rates as the rest. This has the potential to create an uneven playing field and will undermine the Smokefree Aotearoa 2025 Action Plan. I commend this bill to the House.

Thank you, Mr Speaker. I do agree with other members that it’s hard to imagine that this is urgent in Budget urgency. There is some urgency, I accept that. And that urgency is shown in the regulatory impact statement by the substantial increase in capture at the Customs border. In the one year from 29 June 2019 to 29 June 2020, Customs seized a total of 32 grams of molasses; the following year, it had gone up to 430 kilograms. Wow! That’s a substantial increase. The number of seizures had also increased substantially. That June to June 2019 to 2020 had one seizure, but the following year, 2020 to 2021, it had gone up to 57, I think I did see. So there’s no doubt that avoidance is increasing, and so that does lend some urgency. It’s also a substantial volume of material we’re talking about. This is not trivial: 14,000 kilos suspected undeclared imports. That’s just the undeclared imports, so quite a large quantity. So there is a need to be doing this, there is a timeliness. I don’t think it’s under Budget urgency, but this is where we find ourselves. And as I said, National will be supporting this bill. Thank you, Mr Speaker.

The question is that the motion be agreed to.

Thank you. I just want to make a few comments; they’ll be short comments. It was interesting there, the Minister addressing one of the points I made about why this was urgent, and the answer was, “Well, it’s about revenue.” I thought that was a bit ironic. I thought these sorts of things were supposed to be about health. But in any case, in terms of revenue capture, in terms of, you know, actually getting duties off these sorts of things—look, this is the problem of these sorts of regulations, right? You create a prohibition or a duty and then suddenly it all goes underground and you can’t actually tax it properly anyway, and then it just joins the black market with everything else coming in. So there are certainly lots of questions to be had here, and I just want to reaffirm our opposition to this whole process. Thank you, Mr Speaker.