New Zealand Extends Tax Break for Heated Tobacco Products, Sparking Controversy as PMI Emerges as Main Beneficiary

Key Points:

·Tax relief extended: The New Zealand government has extended the tax relief for HTPs by two years, until July 2027. 

·Government at odds with experts: Health experts have pointed out that the safety of HTPs has not been proven, yet the government has still decided to extend the tax relief. 

·Labor Party criticism: Labor Party spokesperson for health, Ayesha Verrall, criticized the government for "getting its priorities wrong" and noted that this tax relief extension is expected to cost the government over $300 million NZD (approximately $180 million). 

·Public health concerns: The Ministry of Health (MOH) has stated that the risks associated with HTPs are higher than e-cigarettes, and it is difficult to assess their impact on public health. 

·Legal background: Philip Morris International (PMI) was forced to remove IQOS devices from the market due to non-compliance with new safety regulations, leading the government to subsequently remove the requirement for removable batteries to address legal issues.

【2Firsts News Flash】According to a report from NZ Herald on July 29th, tax exemptions for heated tobacco products (HTPs) produced by Philip Morris International (PMI) have been extended for two years.

In July 2024, the government announced a 50% tax cut on HTPs for a year-long trial period, subject to evaluation. However, Deputy Minister of Health for the New Zealand Priority Party, Casey Costello, stated that the evaluation will take place in July 2027, and the reduced tax rate will continue at least until then.

The Labour Party's health spokesperson, Ayesha Verrall, expressed shock at the decision to extend tax exemptions given the pressure facing the healthcare system.

“The priorities of the current government are misplaced. They are now providing tobacco companies with tax exemptions worth over 300 million New Zealand dollars (approximately $180 million), while their promised assessment, which should have checked if it is beneficial, is nothing but a farce.”

Costello reduced the tax rate for HTPs by 50% in 2024 with the aim of encouraging people to switch from traditional cigarettes to HTPs by lowering their prices. Despite health officials informing Costello that there is no evidence to suggest that HTPs help in smoking cessation or are safer than cigarettes, she went ahead with the decision.

The Ministry of Finance stated that Philip Morris International (PMI) holds a monopoly position in the HTPs market in New Zealand and will be the main beneficiary of this measure.

Costello's office stated that due to Philip Morris International (PMI) having to remove its IQOS devices from shelves by 2024 (as they do not meet the requirement for e-cigarette devices to have removable batteries), the tax incentive trial will be extended. Last week, Costello lifted the requirement for removable batteries, stating that the Cabinet was informed that this was the best way to resolve a legal dispute with Mason Corporation, which owns the Shoshae-cigarette chain stores.

The spokesperson for the minister stated that the planned assessment in one year is now meaningless due to the fact that HTPs have not been launched on the market as scheduled in 2024.

"Due to the removal of HTPs from the market, no assessment has been conducted. Any reports would be meaningless as the cheaper HTPs were only on the market for two months. The cabinet has agreed to extend the evaluation of HTPs until July 2027, by which time more market data will be available for analysis."

The spokesperson said.

The spokesperson stated that the evaluation will be able to show whether "continued price reductions are encouraging smokers to use HTPs," and whether it helps reduce smoking.

The evaluation will also examine whether the use of HTPs "encourages smokers to stay away from e-cigarettes" and the extent of "adolescents' accidental use of HTPs".

In March 2025, the Ministry of Health (MOH) submitted a brief to Costello on how to evaluate tax exemptions for HTPs. The brief stated that Philip Morris International (PMI) did not initially pass on the tax exemptions to consumers.

According to the briefing, Philip Morris International (PMI) had to remove its IQOS devices from shelves just three months after the start of a tax exemption experiment.

"Due to not meeting the new safety regulations, all HTPs devices have been removed from the New Zealand market. This means that during the 12-month trial period, there will be at least five months without HTPs devices available for purchase."

Costello previously stated that HTPs "share similar risk characteristics with e-cigarettes," but officials from the Ministry of Finance and the Ministry of Health have told her that HTPs are far more harmful than e-cigarettes.

In the March briefing, MOH told Costello that it was difficult to assess whether people using HTPs had reduced harm.

"Although we can assess whether the proportion of current or recent smokers using HTPs has increased, we cannot track whether these individuals have used them before or possibly used e-cigarettes, for example, whether they have shifted from safer alternative products to more harmful ones."

Villar stated that Philip Morris International (PMI) has a responsibility to prove that its products are safe.

"The government has no reason to conduct research for Philip Morris International (PMI) to help its products be used."

Vilar stated that the latest data from the Ministry of Finance indicates that if tax breaks for HTPs continue until 2029, the estimated cost would be as high as NZ$293 million (approximately US$200 million).

"When our healthcare system is underfunded, it is deeply concerning that the government is providing 300 million in funding to a company with ties to one of its members."

Villar said.

Documents indicate that the New Zealand Priority Party's close relationship with the tobacco giant, Philip Morris International (PMI), allowed for an extension of tax breaks for PMI products.

These documents were disclosed in the lawsuit against the American e-cigarette company JUUL, alleging that Philip Morris International (PMI) proposed legislation to the New Zealand ACT Party as part of their lobbying efforts for their HTPs.

Documents allege that Philip Morris International (PMI) personnel "contacted the New Zealand First Party, attempting to obtain favorable regulations for IQOS.

A company providing lobbying services for JUUL claims that New Zealand First leader Winston Peters has connections to Philip Morris International (PMI) and that "any regulations he supports could be highly beneficial to the industry and strongly favor commercial interests in the sector.

"Multiple government departments have also actively reached out to and met with Philip Morris International (PMI) to obtain direct feedback and advice on tobacco legislation."

He posted on X.

The Health Coalition Aotearoa and Smokefree Kids organization are calling for Prime Minister Christopher Luxon to strip the New Zealand First Party of its control over tobacco and e-cigarette affairs, but he stated that Costello is doing a great job.