New Zealand has been embarrassed internationally by the Coalition Government's decision to pull back some smoke-free legislation, Labour leader Chris Hipkins says.
Hipkins said removing those laws and using the additional tax revenue that the tobacco sales would provide to fund tax cuts was "morally reprehensible".
Speaking at his first press conference as the Leader of the Opposition, Hipkins raised concerns about the Government's ability to fulfil its tax relief commitments, narrowing in particularly on the removal of the foreign buyers' tax, the smoking changes, and the acceleration of the return of interest deductibility.
The foreign buyers tax component of National's tax plan, which was expected by the party to contribute about $740 million on average to delivering tax relief, was scrapped during coalition negotiations with New Zealand First.
Issues with the foreign buyers' tax had already been predicted before the election. One analysis by a group of economists found a roughly $530 million fiscal hole each year.
With the tax now cancelled, questions have been asked about what could be used to fill the gap needed to pay for tax cuts.
Finance Minister Nicola Willis said on Saturday the Government would be making a number of reprioritisations to find additional revenue and that the National plan had buffers.
But she also confirmed that changes to the smokefree laws would help bring in more money.
"Coming back to those extra sources of revenue and other savings areas that will help us to fund the tax reduction, we have to remember that the changes to the smoke-free legislation had a significant impact on the Government books - with about $1 billion there. There's also a commitment in these coalition agreements to do a lot more work on tax audits to make sure those who owe tax are paying fairly."
The new Government plans to make several changes to smokefree legislation, including removing a so-called 'generation ban'. This would have prohibited people born after a specific date from purchasing cigarettes, therefore over time removing legal demand.
Hipkins was furious on Wednesday over the decision.
"It shows that just two days into Government, they have already lost their moral compass," he said.
"It's an international embarrassment as well. The first major international headlines that this Government has attracted are around their decision to increase the number of New Zealanders who smoke cigarettes. I think that's bad news for New Zealand. It's bad for our international brand and I think the Government needs to rethink."
Labour's health spokesperson Dr Ayesha Verrall said it was "absolutely disgusting" that the Government was playing with those laws to "fund the National Party's tax credits".
A number of health experts have expressed dismay at the Government's decision, which has also been picked up by overseas media outlets.
Dr Verrall said health leaders were "so shocked" because usually decisions around smoking have a bipartisan consensus.
She found it "absolutely hard" to believe the Government could bring down smoking at the same rate as the current legislation would lead to.
The Government has defended its decision by saying the legislation could have contributed to a black market, something Dr Verrall dismissed.
"The tobacco industry has said that smokefree changes would lead to an increase in the black market when we introduced plain packaging, that never happened," said Dr Verrall.
"There's also been New Zealand academics have shown that the black market is very small in New Zealand."
Health Minister Dr Shane Reti on Tuesday said the Government was committed to reducing the smoking rate.
Another part of the Government's financial plans causing a stir has been the rate in which it plans to restore interest deductibility for rentals.
The National-ACT coalition agreement includes restoring mortgage interest deductibility for rental properties with a 60 percent deduction in 2023/24, 80 percent in 2024/25, and 100 percent in 2025/26.
This is slightly different to what National campaigned on – it wanted it to return at 50 percent in April 2024, 75 percent in April 2025, and 100 percent in April 2026. ACT had in its plan to begin allowing for it from 2023/24.
The Council of Trade Unions on Wednesday said doing it quicker than what National had originally planned would cost an additional $900 million.
Hipkins said this would add additional "pressure on the fiscal hole that was already there as a result of removing the foreign buyer tax, which we knew didn't add up anyway".
National told RNZ in a statement that the details of how the commitments made in the coalition agreements would be implemented, including their cost, were to be considered by Cabinet.
