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Australia Increases Cigarette Taxes

Small retailers also are mad that the government will force tobacco companies to package products in plain wrappings.
May 3, 2010

GLEBE, New South Wales - Australian merchants are upset because the government is going to jack up cigarette taxes and require tobacco companies to wrap their products in plain packaging, SmartCompany.com reports.

Small retailers say they will bear the brunt of these decisions. Starting May 1, higher cigarette taxes pushed the price of cigarettes by more than $2 per pack.

Merchants are furious with the government��s new view of tobacco products, pointing out that tobacco sales generate 30 percent to 40 percent of a small shop��s profits. "As long as tobacco remains legal to sell, purchase and consume, small businesses should not be inadvertently punished for selling it," said Jaye Radisich, CEO of the Council of Small Business of Australia.

"This tax hike means that customers will have less money available to spend in retail outlets on non-tobacco products, so the government tax will increase but sales will drop in small retail shops," she said.

Small retailers will feel the pinch more than bigger stores because of the higher taxes and plain wrapping. "Increasingly the tax on cigarettes will dramatically increase the price, and consumers will be driven to large national chain stores like Coles and Woolworths who can afford to wind back their profit margins to get customers through their doors," she said.

A retailer will take more time to process tobacco sales because of the plain packaging, which can cost the merchant more and also lower sales. Russell Zimmerman, the executive director of the Australian Retailers�� Association, said a recent study found that the change in tobacco displays in convenience stores would raise transaction times, costing those retailers more than $350 million annually.

"For small scale grocery retailers and convenience stores, the sale of products can account for up to 30 percent to 40 percent of their profits and the ARA is disappointed there has been no consideration of retailers �" or other industry groups �" prior to the announcement of the Government's plans," said Zimmerman.