Tobacco crackdown hurts small retailers

Retailers are furious with the Government’s decision to dramatically increase cigarette taxes and force cigarette companies to use plain packaging on their product, saying small shopkeepers should not be punished for selling a legal product.

Shopkeepers around the country reported a surge in tobacco sales yesterday as smokers tried to stock up before the introduction of a higher tobacco excise came into effect at midnight on April 30, pushing the price of cigarettes up by more than $2.00 a pack.

However, retail groups remain angry at the Government’s crackdown on tobacco products, claiming tobacco sales can account for 30-40% of a small shop’s revenue and small retailers will be hit hard by the decision.

Jaye Radisich, chief executive of the Council of Small Business of Australia, said there is no need for the Government’s “extreme measures”.

“As long as tobacco remains legal to sell, purchase and consume, small businesses should not be inadvertently punished for selling it.”

“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 also argues that small retailers will be disproportionately affected by the higher taxes and packaging changes.

“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.”

The Australian Retailers’ Association executive director Russell Zimmerman argues plain packaging will also increase the time it takes for a retailer to process a tobacco sale, leading to higher costs and potentially lower sales.

He points to a 2009 study by accounting firm Deloitte, which measured the impact of the introduction of regulations banning the display of tobacco products on convenience stores around the country. That study found increased transaction times would cost retailers more than $350 million per annum.

“For small scale grocery retailers and convenience stores, the sale of products can account for up to 30-40% 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,” Zimmerman said.