Customs and Excise (Tobacco Products) Amendment Bill

Just referring to the regulatory impact statement—it might be interesting for members given the content of the debate that we’ve had so far. It refers to, in 2020 and 2021 combined, and I’m quoting here from the regulatory impact statement: “We collected $5 million in total duty in goods and services tax on flavoured tobacco. We estimate the loss to Crown from evasion could be up to $31.5 million over the two years.”

It does then, however, go on to say: “In addition, importers are exploiting the regulatory environment in New Zealand and using it to smuggle flavoured tobacco to Australia. Large shipments can be declared at low [per kilo tobacco content] in New Zealand and smuggled to Australia to avoid the much higher excise rates Australia applies to flavoured tobacco. For example, we’re aware of cases where flavoured tobacco has been smuggled from New Zealand to Australia by sending it as smaller parcels that were falsely declared as body scrub.”

I have just two questions to the Minister in relation to both that but also other parts within this regulatory impact statement and the other contributions that I made in the debate so far, particularly around the black market.

The first is just in relation to that point about smuggling into Australia and where this puts us in line with the rest of the world. Do these changes now mean that our flavoured tobacco excise rates are at the same level that they are in Australia—i.e., meaning that this issue, as outlined in the regulatory impact statement, will be removed; if not, what is the disparity there?

Secondly, it’s a question about consideration of the black market. Just in relation to the contribution that I made in the first reading about the fact that the Government’s investing millions of dollars in tackling black market tobacco and the potential for the black market to grow were there to be a regulatory or a tax environment which erred far more towards kind of in-practice prohibition. Is the Minister concerned, or has the Minister seen reports, about what kind of impact this may have on the potential for the growth of the black market in this water-pipe tobacco?

So those two questions: around the comparison to Australia, and around the impact on the potential black market.

While I’m getting some answers, I just want a comment about the Australian import that—apparently no, the Australian rate is higher.

Actually, I want to share with the member that in some jurisdictions—which is obviously Australia—water-pipe tobacco is taxed as if it was 100 percent tobacco. The rate that New Zealand will apply, which I’ve given in my speeches, is calculated on the assumption that tobacco content is 15 percent, which is, I guess, the best current estimate of the typical tobacco content of this product.

So the answer to, “Is the Australian rate higher?”: no. Like I said, it’s 100 percent. But in terms of your black market question, the black market definitely is an issue and Customs see it probably more so than any other agency. I guess that’s why the Government has allocated $10.4 million in this Budget for enforcement to try and stem the black market that you’ve alluded to.

I thank the Minister and the officials for offering those questions at such a rapid-fire rate.

Just to that first question around the comparison to Australia, in particular, and that disparity in the 15 percent and 100 percent rate, and, obviously, that story that I alluded to before around smaller parcels being funnelled through Aotearoa New Zealand to Australia, sometimes being falsely declared as body scrub. Given that disparity which seems to currently exist even were we to make these changes as we are today—is there not still some concern that we might end up seeing Aotearoa being, potentially, that back-door to the Australian black market?

As a result—kind of as a secondary question to that—what kind of collaboration are we seeing with Australian Customs, in particular, to try and either clamp down on or work together or collaborate or try and see some kind of alignment in what our policies might look like?

To that member, we work quite closely with our Australian border agencies and have a post in Australia. We work on a range of Customs-related issues, and this will be but one of many that we work in tandem with our Tasman neighbours.

Again, going to the black market issue, this is why we’ve made decisions in this year’s Budget to actually address whether it’s in scrubs, whether it’s hidden anywhere, so not only the bill that we’re passing today but the extra resourcing—the $10.4 million we got in Budget 2022—would absolutely put a spotlight to actually disincentivise people smuggling any illegal substances, either into this country or to other countries because New Zealand is thought as a soft spot.

That’s not what the intention is here, and with Customs’ constant watching, we want to monitor it and manage that in, I think, a very professional way.

Following up on that line of questioning, I totally take on board the Minister’s point with regard to extra resourcing, particularly for clamping down on the black market in tobacco. That is, of course, I think, the key point of interest or curiosity, particularly for the Greens, when we’re looking at harm reduction for all substances.

How do we regulate a substance, knowing that a substance can be harmful, in order to reduce that harm, noting that even with the imposition of prohibition or taxes to the point of practical prohibition that we’re not going to necessarily eliminate this thing? In fact, there’s the potential for perverse outcomes, where we might see people cooking things up in their kitchens and distributing them on the streets, which then means that these things are unregulated and, in turn, that there might more harm produced.

Just again, alluding to that point that the Minister made about how we get that balance right and obviously our international cooperation too, and that extra resourcing to the tune of—I believe, off the top of my head, if I’m correct from my recollection of Budget documents—around $10 million for clamping down on black market tobacco. What kind of consideration has the Government given to whether there is a chance to perhaps err into the space of chasing one’s tail, where you’re throwing good money after bad without potentially getting that balance right on what the level of effective tax rate is for the likes of tobacco, noting that there is now needing to, obviously, be more money put into policing the black market; is there potential that we end up getting into a situation like, I might say, with cannabis?

I want to thank the member for the questions. This isn’t about eluding the questions she’s asking, but we are trying to debate this bill, and I think I’ve attempted to address what Customs is doing with this bill. I’ve declared the 15 percent that we are targeting and also why we’re doing it under urgency. I feel I’ve answered the questions, and if members want to ask something specifically about the bill, then I’m more than happy to answer that here this afternoon.

A specific question, then, if I may. What impacts, if any, does the Minister think that this would have on the potential for the increased black market for water-based tobacco?

I think it’s going to have a significant impact, both with the changes to the legislation, the Act that governs it, but also, like I said, the $10.4 million that’s invested by the Government in Budget 2022.

Mr Speaker, the committee has considered the Customs and Excise (Tobacco Products) Amendment Bill and reports progress without amendment. I move, That the report be adopted.

Motion agreed to.

Report adopted.

Third Reading