NZ Govt Defends Heated Tobacco Excise Cut as Smoking Cessation Strategy

The New Zealand Government has reiterated that its decision to reduce the excise tax on Heated Tobacco Products (HTPs) is a public health initiative, not a concession to the tobacco industry. Associate Health Minister Casey Costello made a strong defence of the measure today, responding to criticism from opposition parties and some media outlets.

Minister Costello emphasized that the excise reduction is meant to provide smokers with more options to quit smoking conventional cigarettes by switching to potentially less harmful alternatives. “The Labour Party and some people in RNZ are fixated on tobacco companies,” she said, “but this policy is about helping people stop smoking, not aiding the industry.”

Policy Background: Halving the Excise to Promote HTPs

Last year, the Government halved the excise duty on HTPs as part of a strategy to examine whether these products could contribute to reducing smoking rates. Although the full-scale evaluation was initially planned for completion within a year, regulatory issues concerning vaping devices led to a temporary market withdrawal of HTPs, delaying the process.

Now that HTPs are back on the market, the review period has been extended to July 2027 to allow for a more comprehensive assessment based on new usage data.

Health Ministry Modelling: Early Signs of Impact

The 2023 Cabinet paper backing the policy included preliminary projections from the Ministry of Health, estimating that 7,200 smokers might quit within the first two years of the excise reduction. These figures suggested promising health gains but also highlighted financial implications.

The Treasury flagged potential decreases in government revenue as a "contingent liability"—a budgetary recognition that widespread quitting could diminish tobacco excise returns and that reduced tax on HTPs could further lower revenue.

Minister Costello addressed this point directly: “The liability exists only if people actually quit smoking and the Government loses excise income. If that happens, it’s a win for public health.”

Rejecting Opposition Claims: “No Tax Break for the Industry”

Responding to accusations that the policy benefits tobacco companies, Costello stated, “What Labour and RNZ are saying is incredibly misleading. This is no ‘tax break’ for the industry.” Instead, she reiterated the Government’s focus on reducing smoking prevalence by offering viable alternatives.

Costello stressed that the demographics of smoking have shifted significantly. “Most smokers now are older and long-term users. We need to try different strategies to support them in quitting, and that includes exploring whether HTPs can be part of the solution—just as vaping has helped many.”

Accountability and Oversight: Ensuring Consumer Benefit

To ensure the excise cut is passed on to consumers rather than absorbed by the industry, Minister Costello has directed the Ministry of Health to monitor price adjustments. She wants the benefits of the tax reduction to reach smokers directly, supporting their transition to lower-risk products.

Additionally, an expert advisory group has been established to advise on regulatory improvements across all nicotine and tobacco products. This group includes leading health organizations such as Health Coalition Aotearoa, ASH, Vape Free Kids, Cancer Society, Heart Foundation, Hāpai te Hauora, the Asthma and Respiratory Foundation, and universities including Auckland and Otago. Their findings are expected before the end of the year.

A Strategic Bet on Health Outcomes

While full evaluation results will not be available until 2027, the Government’s current stance reflects a proactive public health approach. By broadening cessation tools and promoting harm reduction, the policy aims to accelerate New Zealand’s journey toward a smokefree future—even as it stirs political and fiscal debate.