Warehousing trick costs Govt $7.8 million

Press, 7 April 1987, Page 39

Warehousing trick costs Govt $7.8 million

PA Hamilton An annual warehousing trick performed by tobacco companies is costing the Government $7.8 million in missed taxes, says the director of Ash, Ms Deirdre Kent. Although the action was quite legal the Government should now do something "to prevent it, she said.

Ms Kent said there were big fluctuations in the number of cigarettes released for sale each month. In the month before the Budget each year and before GST, the tobacco companies released extra large quanti-

ties of cigarettes for sale to avoid paying the expected higher tax. “They do this out of fear every year. They push stock out prematurely to avoid taxes. They probably move cigarettes over some imaginary line in their warehouses after it is released from bond and they have paid taxes on it,” she said.

However, the Government has already increased the tax paid on cigarettes without taking up the Ash suggestion., , A spokesman for the Finance Minister, Mr Roger Douglas, said that

the tax on cigarettes had changed to an "according to value basis.” This meant as the price of cigarettes went up so did the tax paid on them. The cigarette companies’ practice was not new and happened with other goods such as alcohol. There was a risk involved in it because there was no guarantee the price of goods such as cigarettes would go up in the Budget, the spokesman said.

It was not something the Government planned to work against at this stage, he said.