Tobacco excise tax evaluation

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New Zealand is nearing the end of a series of excise increases on tobacco that began in 2010 and scheduled to end in January 2020.

An evaluation is needed to understand the impact of the policy on reducing tobacco consumption and smoking and to help inform the future direction of polices which use price as a lever to reduce the harm from tobacco. We are interested in understanding any unintended consequences of tobacco price increases, such as on crime (robberies and illicit trade), as well as the financial impact on smokers and their families.

We require work to explicitly consider the impact for Māori (males/females), Pacific peoples, low-income populations, and young people (under the age of 18 and 18–24 years).

The information sought through this Evaluation will address the following specific questions:

  • Do people quit, attempt to quit, reduce the amount they smoke, or change their smoking behaviour in other ways because of the price of tobacco? Which groups of people are impacted and by how much? Are past impacts likely to hold in the future, with further price increases?
  • Have people changed their perceptions of the affordability of tobacco?
  • Have people changed their household spending in any way to buy tobacco?
  • Has the tobacco industry implemented pricing and other market strategies to minimise the impact of the tax increases (e.g. budget brands, controlling the extent to which increases are passed on, and the timing of increases)? What are these strategies and what impact have they had? What is industry’s likely future response?
  • Are the tax increases resulting in an increase in illicit trade and/or robberies? If so, what is the size of this problem and what is the likely future trajectory?
  • What are the expected costs and benefits of future price increases, across the various different impacts (health, family budgets, crime and so on)?

Statement from EY

Conflicts of interest:

To the best of our knowledge, there continue to be no actual or potential conflicts preventing us from working with you. All potential engagements with clients in high-risk industries, such as tobacco, are subject to a global approval process and risk assessment, leading to many engagements in these sectors not going ahead. Furthermore, we have processes and procedures in place to ensure all individuals within a proposed engagement team are checked for potential conflicts of interests.
EY formalised our position in Oceania on the provision of services to the tobacco industry, approximately three years ago. The Oceania Partnership, supported by our global executive, made an explicit decision to limit the services we provide to the tobacco industry to only compliance based tax and accounting services. The nature of this decision is not a passive position. Partners and staff are prohibited from proactively seeking the provision of consulting services to the tobacco industry and we decline requests for tender, even if a company wishes to directly appoint EY. However, we note, as a large global organization, there may be some legacy engagements undertaken for EY global requirements, under an EY global engagement letter that pre-date this decision. It is our understanding that one of these legacy engagements, a minor quantitative update of a much older piece or work in the Pacific Islands, was undertaken after the ban on consulting services took effect. This is the only engagement that could potentially be classed as “consulting” we have been able to identify, having contacted and reconfirmed our declaration with the EY Oceania senior leadership team (including a number of that team in global leadership roles).
While we acknowledge that EY, as a large global organization, may have from time to time provided professional services to the tobacco industry, we can confirm we have provided no advisory services that support or advocate consumption or sale of tobacco. As stated previously, if any interest becomes apparent we will declare it immediately and deal with the conflict transparently.

Quality assurance:

Our aim is that the work we produce meets your needs and delivers the level of service quality you expect. EY places a great deal of emphasis on ensuring all of our processes and procedures go beyond best practice in the industry, and we invest heavily in the quality assurance protocols of our research and evaluation team, including the various in-house teams that support our frontline researchers. We do this through the application of our global Quality Assurance (QA) programme which is built into our engagement delivery and the way we do business. We are certified under the Quality Standard ISO 9001, having obtained it in 1994, and we proudly continue to hold that accreditation today.
To drive the effective implementation of key policies our partners and staff complete formal independence and conflicts of interest declarations and undergo stringent review processes. Additionally, we offer our Assessment of Service Quality (ASQ) service free of charge. Throughout our relationship, a senior EY professional, independent from our proposed team, will meet with you to assess our performance against your standards. This EY process facilitates our efforts to meet client expectations, enhance service quality, approach the future strategically, and build and sustain strong, mutually-beneficial business relationships. We will also reach out to the College of Public Health Medicine and invite them to undertake an independent review of our evaluation.

Read the Consultancy Services Order between the Ministry of Health and EY for the Evaluation of the tobacco excise increases as a contributor to Smokefree 2025. (PDF, 2.1 MB)

Evaluation of the tobacco excise increases as a contributor to Smokefree 2025

Ernst & Young Transaction Advisory Services Limited (EY) was contracted by the Ministry of Health to undertake an Evaluation of Tobacco Excise Increases as a Contributor to Smokefree 2025.

The results of EY’s work, including the assumptions and qualifications made in preparing the report, are set out in EY's final report dated 27 November 2018. This report will be used to provide advice to Ministers but does not represent the Government's position.

Correction: Section 3.1.13 (Page 61)   NZ is not a party to the Protocol to Eliminate Illicit Trade in Tobacco Products. It does not automatically apply to NZ as a consequence of us being a party to the FCTC. NZ's position is to keep a watching brief at this stage on whether illicit trade is becoming a concern.

There were two earlier drafts which were reviewed by the Ministry. Feedback from these contributed to the final report.

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