Cigarettes up, petrol down

Press, 1 August 1986, Page 1

Cigarettes up, petrol down

Smokers were walloped in the Budget but motorists smiled upon. A packet of 20 cigarettes now costs about $2.50 after a more than 70c Increase in tax, effective from midnight last night. Petrol prices, however, were cut 6c a litre and diesel, 4c. The cuts, the fifth in 12 months, have brought the price of super down to 76c, regular to 73c, and diesel to 57.3 c. The Minister of Energy, Mr Tizard, said the reductions might have been more dramatic except for the costs of the refinery and synthetic fuel “think big” projects to pay for which the Government had imposed a special 16c a litre tax.

Without those commitments, the price of petrol could have been cut to 55c a litre, including GST, and diesel to 37c, he said.

Yesterday’s cuts, however, will be more than cancelled out when GST is introduced because, at 10 per cent, it is expected to bring prices back up to about 84c and 63c a litre respectively, perhaps a little less depending on what happens to world oil prices and the exchange rate. Until midnight last night, they were lower than that at 82c and 61.3 for diesel. Mr Tizard said some people would criticise the Government for cut-

ting fuel prices now then increasing them again on October 1 to much the same levels. But he said GST could not be Imposed in advance and that in the meantime, the Government wanted to pass on any savings possible. That statement read oddly beside the decision on cigarettes where the GST Impost is effectively being applied nbw although it will not be collected as GST until October.

The advantage of this is that prices will not rise again with the Introduction of GST; the disadvantage is that they might have remained about 21c a packet cheaper until October.

The Minister of Finance, Mr Douglas, said yesterday’s increase raised the tax a cigarette from about 5c to more than 8c and that smokers were now paying about 71 per cent of the price to the Government in tax.

However, he said cigarette taxes in New Zealand had been low by International standards and were still low compared with European countries.

He also said the increase, which will raise $95 million this year alone, might encourage some to give up smoking. In a full year, it is expected to raise $l5O million.