Auckland responds as New Zealand slashes inbound tobacco allowances

NEW ZEALAND. The government of New Zealand is to slash inbound tobacco duty free allowances from 1 November, reducing the limit from 200 to 50 sticks.

The reduction was announced by New Zealand Associate Minister of Health Tariana Turia as part of the government’s budget plans this year. Turia said that the new limit is part of New Zealand’s public health policy, and aligns with a similar reduction made by Australia in 2012.

Auckland Airports has responded quickly to the government’s budget plans. General Manager Retail and Commercial Richard Barker said: “Auckland Airport will play its part in working with government to inform travellers of the proposed change to the duty free allowance well before 1 November. It is important to the maintenance of New Zealand’s reputation as a tourism destination that this is done well.”

The airport estimated that the potential full year impact of reduction could damage its revenue by between NZ$7 million (US$6.07 million) and NZ$8 million (US$6.93 million).

The news is a big blow to New Zealand travel retailers as well as those in airports serving heavy New Zealand-bound traffic, notably in Australia but also in locations such as Singapore, Bangkok, Fiji (and other Pacific islands) and, importantly, China. Pro-industry lobbyists had asked for an exemption for non-New Zealanders visiting the country, to no avail. Travel retail industry sources say the change was brought in suddenly and with no prior warning.

“What’s so upsetting is that there was no consultation,” said one source. “Earlier, we had suggested an exclusion for Chinese and other non-New Zealander tourists, and we had suggested that any changes be made on a phased basis.”

The timing could not be much worse from Auckland and Sydney airports’ perspectives with both currently in the process of duty free tenders. “If you look at an Auckland or a Sydney duty free contract, you’ll have to generate revenue from other categories to generate the MAG [Minimum Annual Guarantee],” one prominent retailer told The Moodie Report.

When Australia introduced a similar reduction for inbound tobacco allowances, it wasn’t just the Arrivals duty free business that was affected. One Australian retailer told The Moodie Report that besides an approximate -90% slump in Arrivals sales, tobacco purchases on departure had subsequently halved.

Here the situation will be flipped with New Zealand airports being hurt most on Arrivals but almost certainly losing business in Departures too, as vacationing Kiwis will not buy up their full allowance if they feel they cannot bring any unsmoked cigarettes back into the country. Conversely, airports such as Changi, Sydney, Melbourne and Brisbane will take a big hit in Departures business.

Turia added that she had considered abolition of the allowance but had decided it would not be practical. The budget will include additional funding for Customs authorities of NZ$2.7 million (US$2.34 million) in 2014/15, and NZ$420,000 (US$363,949) in the following years to assist with implementation of the new rules.

How the allowance cut was reported on New Zealand news website Scoop
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