Department of Health telling porkies on Plain Packaging

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Remember this statement on the Department of Health website?

Treasury has advised that tobacco clearances (including excise and customs duty) fell by 3.4% in 2013 relative to 2012 and fell a further 7.7% in 2014. Tobacco clearances have fallen a total of 10.8% since 2012 when tobacco plain packaging was introduced.

Well it’s still there.

That is a very interesting claim – because Treasury has the data that can clear up the issue as to whether plain packaging worked or not. Fairfax Media, for example, thought the case was done and dusted.

The federal Treasury has entered the debate over cigarette sales, publishing previously secret information that shows sales falling since the introduction of graphic health warnings and plain packaging.

The Treasury collects data on sales per stick in order to levy tobacco excise, but has until now withheld it from publication to protect commercially sensitive information.

I rubbished that argument here.

David Leyonhjelm followed up with questions at Senate Estimates:

The Health Department website states that ‘The Treasury has advised that tobacco clearances (including excise and customs duty) fell by 3.4% in 2013 relative to 2012 when tobacco plain packaging was introduced’.

Further to other questions taken on notice on this issue:

a) What was the entirety of the Treasury advice?
b) Who requested the Treasury to provide the advice?
c) Was any Minister or party outside of Government involved in the request?
d) To whom (in addition to the Health Department) did Treasury provide the advice?

Treasury provided a very waffly answer:

a) The Department of Health asked Treasury whether Treasury had any data to support the release of Australian Bureau of Statistics data on tobacco consumption. Treasury advised that clearances of tobacco fell by 3.4 per cent in the 2013 calendar year relative to the 2012 calendar year. Treasury also advised that publication of more detailed data related to tobacco excise was limited by concerns regarding taxpayer confidentiality.
b) The advice was requested by the Population Health Division, Australian Government Department of Health.
c) To Treasury’s knowledge, no other Minister or party outside of Government was involved in the request.
d) To Treasury’s knowledge, the advice was provided only to the Population Health Division, Australian Government Department of Health.

Very vague as to who actually did what. Like who actually calculated the 3.4 per cent fall in tobacco clearances.

Last night I discovered that Treasury had actually published that previously secret information on its website.

Well. This isn’t the first time I’ve caught Treasury generating dodgy numbers. It isn’t even the second time.

So this is what they have done:

They calculated tobacco clearances for the whole of 2012 and the whole of 2013 and compared the difference between the two. When I do that I get the 3.4 per cent decline that Treasury report. But … the plain packaging policy didn’t get introduced on 1 January 2013 as that analysis implies. It was introduced on 1 December 2012 (in fact it was phased in over some months before December 2012, but from that date all legal tobacco had to be sold in plain packages). When you compare the 12 month period before December 2012 to the 1 month period after December 2012 you get a slightly different picture – tobacco clearances declined by only 0.8 per cent (yes less than 1 per cent).

But as they say in the classics: But wait there is more. As it turned out tobacco companies had to be refunded for non-compliant packages where excise had been paid but the product not sold. David Leyonhjelm had asked about this too:

The question is: did the process where branded packs were destroyed and replaced by newly imported plain packs boost tobacco clearances in 2012?

True to form Treasury provided a waffly answer.

It is not possible to infer the effect of plain packaging refunds on annual tobacco clearances. With the data available it is not possible to determine whether the tobacco clearances in 2012 were boosted by the destruction of branded tobacco products. While total clearance data is available for 2012 and 2013, it is not possible to disaggregate this data to ascertain the specific impact of destroyed products.

While there were tax refunds in 2012 and 2013, it is not possible to determine from the data when the tax related to these refunds was received. Further, while it is likely that the majority of refunds in 2012 and 2013 related to the destruction of tobacco products, it is not possible to precisely ascertain the value relating to branded tobacco products, as refunds can also be due to returned or unsold tobacco products.

As we noted at the time – that answer is simply astonishing. Treasury doesn’t know exactly why and when it refunded tax revenue. For our purposes today, the important thing is that clearances in the pre-plain package era is overstated – so I subtract the excess from the pre-plain packaging era and recalculate.

Tobacco clearances increased in the 12 month period following the introduction of the plain packaging policy by 0.5 per cent. Yes – that number is exactly half of one per cent. But is is also a 3.952 per cent (i.e. a rounding error away from 4 per cent) turn around from what Treasury and the Health Department claimed to be the case.

To place the magnitude of Treasury’s misleading analysis (I suppose we shouldn’t be surprised that yet another of the previous government’s signature policies is based on a lie) into context – that 3.4 per cent figure has formed the basis of the arguments in favour of plain packaging in foreign nations. Here, for example, is the French submission to the EU on their plain packaging policy:

Plain packets were introduced in Australia in December 2012; since then, 2013 saw a 3.4 % fall in the number of tobacco consumers relative to 2012 before their introduction (http://www.health.gov.au/internet/main/publishing.nsf/Content/tobacco-kff).

Note that they cite the very same (now revealed to be dodgy) Health Department site.

As we have argued all along – this policy is a failure and now we even have the definitive Treasury data that vindicates our arguments.


This article first appeared here at the Catallaxy Files.

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