Simon Benson, 15 March 2016

THE price of a packet of cigarettes could soon soar to $40 if the Turnbull government copies a Labor plan to help pay for income tax cuts by slugging smokers.

A senior government source confirmed to The Daily Telegraph that a proposal to increase the tobacco excise in the May Budget would be taken to the Expenditure Review Committee.

It is understood Treasury has already costed various options and Labor has claimed that its proposed tobacco excise increase would raise $47 billion in revenue over 10 years.

Treasury modelling, however, is believed to show a more modest return.

It is believed the most likely option for the Coalition government would be a watered-down version of Labor’s policy, with the introduction of a smaller excise increase.

When he was opposition leader in 2009, Prime Minister Malcolm Turnbull championed a higher tobacco excise to help fund private health insurance rebates.

Treasurer Scott Morrison’s office yesterday would not respond to what it described as “speculation” surrounding the tax rise.

But a senior government source said it was being seriously considered as an option since other tax proposals such as changes to negative gearing and raising the GST had fallen off the table.

Labor has claimed that its policy — quarterly 12.5 per cent excise increases until 2020 — would return $3.8 billion in extra revenue to the government during the first four years and $47.7 billion over 10 years.

Opposition Leader Bill Shorten has pitched his excise hike as a health measure to stop people smoking.

Should it be successful, however, the revenue from the tax hike coming back to government would be eroded as more people stubbed out their smoking habit.

The previous Labor government used a tax hike on tobacco in 2013 after a collapse in the Budget bottom line, and to help pay for big spending measures.

Mr Shorten claims that, apart from the tobacco tax, the opposition has costed policies on negative gearing, cuts to superannuation tax concessions and tax nets for multinational companies.

However, the government has accused Labor of having a “tax and spend” approach, exposing an $80 billion spending black hole.

Federal MP Ewen Jones reckons giving up smokes was the best thing he ever did.

The Queensland coalition backbencher acknowledged the massive cost of smoking to the community and public health system with cancer patients “getting bits and pieces chopped off”.

“One of the greatest things I’ve ever done is given them up,” he told reporters in Canberra on Tuesday.

Mr Jones said he had not heard any concrete proposals from his side of politics on changes to the tobacco excise.

“No government or party comes towards smokers with a position of policy purity – it is an income stream,” he said.

Liberal Democrats senator David Leyonhjelm says the move may grow the tobacco black market.

“We already have almost the highest taxes on tobacco in the world … it is contributing to a major black market in cigarettes,” he told reporters.

Yesterday, Labor also pledged to legislate “David and Goliath” changes to consumer laws that would allow small businesses and individuals to take on large corporations with a waiver of the legal costs that would have otherwise prevented cases proceeding.

Extracted in full from the Daily Telegraph.