Tuesday, November 11, 2008

Australian Case Study on the Impact of Taxation and Legislation of Cigars


Australian cigar writer Samuel Spurr reports on the impact of taxation and legislation on the Australian cigar industry.

"The Australian cigar community faces some of the most stringent government legislation and taxation in the world. It continues to push ahead though, despite such intervention. Current American freedoms must be appreciated and fought for, for the sake of fellow cigar lovers around the world. The threat posed by anti-smoking groups and government taxation and legislation must not be slept on."


Imagine a government tax of US$122 per pound of tobacco. Attendees at events such as Cigar Aficionado’s ‘Big Smoke’ and the IPCPR’s annual trade show can no longer enjoy cigars as smoking is illegal at all indoor venues. Tobacco advertising is banned, and manufacturers cannot sponsor corporate, community or sporting events. Cigar enthusiasts cannot light up in their favourite cigar shop, whilst smoking at some public parks and beaches is banned.

This is not an imagined scenario for Australian cigar suppliers, retailers and consumers. This is current state of tobacco taxation and anti-tobacco legislation and all involved with premium tobacco have had to deal with such government taxation and legislation for the better part of the last 20 years.

Taxation
Australian cigar smokers have paid a premium price for cigars for some time. Australia’s federal tobacco tax is approximately AUD$300 per kilogram or USD$130 per pound. This dollar amount is not static, instead rising twice per year in line with inflation. Local consumers have been ‘conditioned’ for many years to the retail price of premium tobacco. Because of this ‘conditioning’ Australian cigar smokers continue to purchase cigars and the taxes have not had a ‘loss of business’ impact.

Australian retailers report that some clients may purchase less in terms of volume due to budgetary constraints however as a rule they will spend what they are comfortable with. For the American cigar retailer, proposed taxes such as SCHIP may have a ‘loss of business’ impact as American cigar lovers are not prepared for such immediate price hikes.

Anti-tobacco Legislation
It can be argued that government intervention through legislation has had and will continue to have the biggest impact on cigar enthusiasts. Australia has taken some hits and has survived but if similar legislation continues to be introduced in the US, losses can unfortunately be expected.

Australian distributors, retailers and consumers would agree that the biggest impact has been the loss of entertainment venues which allow indoor smoking. Indoor smoking bans introduced across Australia in 2007, made no exemptions for cigar lounges or tobacconists. Despite this, cigar lovers continue to find pubs or bars which provide sheltered outdoor facilities that comply with new legislation. Australia’s predominantly temperate climate generally allows for year-round outdoor smoking – something not true of some parts of North America.

The Future
Despite the impact of legislation and taxation, the Australian cigar industry is looking forward. Cigar events continue to be well-attended, doing much to improve the humble cigar’s public perception. Preparedness is however, still a strong requirement for those commercially involved with cigars. Established retailers continue to prosper but new retailers without a loyal customer base may struggle to be viable. Those retailers that remain are innovative and maintain the highest of customer service standards.

The Australian cigar community faces some of the most stringent government legislation and taxation in the world. It continues to push ahead though, despite such intervention. Current American freedoms must be appreciated and fought for, for the sake of fellow cigar lovers around the world. The threat posed by anti-smoking groups and government taxation and legislation must not be slept on.

Samuel Spurr is Australia’s premier cigar writer, contributing to European Cigar Cult Journal and a number of cigar industry publications. His blog, Inlumino Cigar News Australia, keeps Aussie cigar smokers up to date with news, events and reviews.

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