Associate Health Minister Casey Costello. Photo: RNZ / Samuel Rillstone
The associate health minister says the $216 million set aside by the government to cover the cost of cutting excise tax to heated tobacco products is simply a contingency, and has indicated it is unlikely to end up costing that much.
Casey Costello, who is also customs minister, has implemented a 50 percent cut to the excise tax on HTPs, where the tobacco is heated rather than burned.
Cabinet has agreed to set aside $216m to cover the estimated revenue lost by cutting the excise.
Speaking to media on Tuesday, Costello stressed that the fund was just a contingency and was unlikely to cost as much as what was modelled.
"We had just under $6m of excise across all smokeless tobacco products, that was all of the excise tax on all of the smokeless smokeless products. So that was a contingency sum over four years," she said.
Costello said the modelling had been based upon the four years since HTPs were introduced in Japan, from 2016 to 2019. She noted Japan does not have legalised vaping as a smokefree tool.
The excise tax cut would be trialled for a year, to see if it helped people to stop smoking.
Costello's paper noted that because there was currently a monopoly market on HTPs in New Zealand, the extent to which the excise reduction would be passed onto consumers via lower retail prices was unclear.
She said she would expect suppliers to lower their prices.
"This is what we're going to monitor, that is why we're doing it as a trial period to see if it does create a price differential. I think it will create a price differential," she said.
Costello said she would also track smoking numbers over the course of the trial, and regularly meet with quit-smoking providers.
Her paper noted there was no clear evidence to show HTPs were significantly less harmful than tobacco. But Costello is insisting they are.
"We know it's less harmful. We're not saying it's without harm, which is exactly the same with vaping, it's not without harm but it's less harmful than smoked tobacco and our target is to get people to quit smoking."
She pointed to advice from the American Food and Drug Authority, which stated people who switched to HTPs could reduce their exposure to harmful chemicals.
Labour's health spokesperson Dr Ayesha Verrall said the use of tobacco should not be incentivised.
"The advice I had when I was minister of health was that there is no harm reduction evidence for heated tobacco. That's the claim the minister has made, but there's no evidence for that," she said.
Labour said the tax break would go straight into the pockets of tobacco companies, and could have been spent on other things like free cervical smears or dementia support.
Costello would not be drawn on whether the Cabinet paper's reference to a "monopoly market" was about tobacco company Phillip Morris.
"I'm not sure who the suppliers are, what I'm doing is trying something to get people to quit smoking," she said.
Costello has said she has no links to the industry and had not spoken to tobacco lobbyists about the formulation of policy.