The government has agreed to set aside $216 million it may need to pay for tax cuts for heated tobacco products (HTPs). The contingency was revealed in the Budget and would cover the cost of cutting the excise tax on HTPs by half. Officials had advised against the move, warning that Philip Morris New Zealand, the sole supplier of HTPs in New Zealand, would likely be the main beneficiary of the policy change.

The New Zealand Electoral Commission maintains annual tables of ‘Party donations and loans by year’ for all registered political parties, including the New Zealand National Party. For the year ending 31 December 2025, the table lists donors and amounts such as DMH Developments Limited (NZD 50,000), Fletcher Building Limited (NZD 20,000), Susan Zhou (NZD 41,000), and The Nationalist Trust of Timaru (NZD 20,000). Tobacco companies do not appear as donors in the National Party’s 2025 disclosure table, and large donations must be declared under New Zealand law.

In 2024, the NZ Government cut the excise tax on HTPs by 50 percent and set aside a contingency fund of $216 million to cover the tax cuts, against official advice. Officials pointed out that PMINZ (as the sole supplier of HTP in NZ) was likely to be the main beneficiary of this policy change. There is no legislation specifically prohibiting the tobacco industry from donating to political parties, candidates, or campaigns and lobbyists, although such contributors and donations over a certain amount must be declared.

The decision by Costello, who is also Customs Minister, has seen the Government set aside a contingency fund of $216 million for the tobacco tax changes over the next four years.[3] RNZ reports this money is to pay for a cut to the tobacco excise tax that largely benefits Philip Morris, one of the world’s biggest tobacco companies.[3] The article frames the decision as fulfilling a key request in a 2017 Philip Morris lobbying document for a freeze or cut to tobacco excise increases.[3]

In Budget '24, the National Government put aside $216 million to pay for a tax cut which mainly benefitted one company: global tobacco giant Philip Morris. Instead of giving hundreds of millions to big tobacco, National could have spent the money sensibly, on New Zealand. Key projects like Dunedin Hospital are paused, cut or cancelled, but the Government has instead rushed to prioritise a reckless tax cut for Philip Morris instead.

Recent policy changes have led to a dramatic drop in NZ's global ranking for tobacco interference protection. In 2024, the government implemented a 50% excise tax cut on heated tobacco products and set aside a $216 million contingency fund to cover the revenue loss, a move described as tobacco industry–friendly and contrary to Ministry of Health and Treasury advice that the main beneficiary would be Philip Morris New Zealand.

RNZ reports that the new National-led government decided to cut a component of tobacco excise, with the cost to the Crown estimated at $216m over four years.[9] Labour health spokesperson Ayesha Verrall says: "This government has the wrong priorities. It is giving tax breaks to tobacco companies now valued at over $300 million and the evaluation they are relying on to defend this decision has not yet been done."[9] RNZ explains that the original one-year tax cut was extended by two years, increasing the total value of the tax break to more than $300m.[9]

A Radio New Zealand report on a leaked lobbying plan by Philip Morris describes how the tobacco company sought political support for a tax change. The article says the leaked document recommended targeting political parties, including NZ First, ‘to get more political pressure placed on the government’ in pursuit of a tax outcome. The story reports that the tobacco giant ‘got its tax cut wish,’ indicating that the government approved a tax change beneficial to the company, but it does not describe a direct budgetary payment of hundreds of millions of dollars to the tobacco industry; rather, it focuses on lobbying for favourable tax treatment.

There is no legislation specifically prohibiting the tobacco industry from donating to political parties, candidates, or campaigns and lobbyists, although contributors and donations over a certain amount must be declared. No instances of the New Zealand government accepting offers of assistance from the tobacco industry, endorsing its policies or of industry representatives attending policy meetings was identified. The report recommends implementing rules mandating that the government does not provide financial aid in any way to the tobacco industry.

An article in The Conversation on tobacco industry political influence in Australasia notes that in Australia ‘The National Party stands as the final major Australian political entity to accept financial contributions and membership fees from the tobacco sector.’ It reports that in the 2024–25 period the Nationals received money from British American Tobacco. The article contrasts this with other parties that have stopped taking tobacco donations. The piece is about the Australian Nationals, not the New Zealand National Party, and it discusses donations received from tobacco companies, not government payments to them.

The National-led Government put aside $216 million of public money to fund a tax cut for a tobacco company. This is a government choosing to give hundreds of millions to tobacco companies. Luxon urgently needs to rule out giving millions more in tax breaks to tobacco companies.

The Lung Foundation Australia, commenting on Australian politics, posted that ‘The tobacco industry donated $225,000 to the National Party in the 2025 financial year.’ The post continues: ‘These payments bought direct access to the National Policy Forum and politicians giving tobacco companies a seat at the table to influence decisions that affect public health. The Nationals are the only political party in Australia that accepts donations from the tobacco industry.’ This refers to donations from tobacco companies to Australia’s National Party, not to any payment from the New Zealand National Party or New Zealand government to tobacco companies.

National's $216 million tobacco tax cut appears to prioritise the needs of the tobacco industry, rather than New Zealanders' health. Luxon urgently needs to rule out giving millions more in tax breaks to tobacco companies. He can find billions for tobacco companies and landlords, but nothing for frontline staff in our hospitals.

The New Zealand tobacco industry makes a significant contribution to the New Zealand economy in terms of government revenue, retail sales and employment. Each year, the industry generates substantial excise tax revenue for the government; however, recent policy debates have focused on changes to excise rates for certain tobacco products, rather than on direct subsidies or cash payments from the government to tobacco companies.

In a media release titled "National Caves To Big Tobacco As NZ Tumbles Down Global Rankings", the Green Party says: "From handing a $300 million tax break to a tobacco company, to scrapping laws that would have created a smokefree generation, National has put tobacco profits ahead of New Zealanders’ health."[4] The statement links the $300m figure to tax policy decisions benefiting the tobacco industry, not to a direct cash payment or grant.[4] It criticises the National Government for prioritising tobacco companies over public health.[4]

In December 2022, New Zealand enacted world-leading tobacco control legislation aimed at leading the nation towards a 'smokefree' future by 2025. In late 2023 and 2024, however, the incoming government announced the repeal of key smokefree policies and introduced measures including cutting excise tax on heated tobacco products, prompting criticism that the changes favour the tobacco industry at the expense of public health.

Another Labour Party Facebook post states: "Luxon urgently needs to rule out giving millions more in tax breaks to tobacco companies. National is giving $300 million in tax breaks to tobacco companies. It's completely out of touch and New Zealand deserves better."[6] The language describes the policy as "tax breaks" totalling $300m, rather than a direct NZD 300 million grant or subsidy handed over to the industry.[6]

New Zealand’s new government has faced strong criticism from health advocates after approving a 50 percent excise tax cut on heated tobacco products, backed by a NZ$216 million contingency fund in the 2024 Budget. Critics say the policy primarily benefits Philip Morris New Zealand, the country’s only supplier of heated tobacco, and have accused the National-led coalition of "giving hundreds of millions to big tobacco" through tax breaks rather than direct subsidies.

In a Labour Party video caption, the party says: "While cancer services are cut, doctor's fees skyrocket and hospitals overflow, Luxon is giving a $300 million tax break to tobacco companies."[10] The phrase "$300 million tax break" indicates the figure refers to reduced tax liabilities or forgone revenue, not a direct transfer of NZD 300 million from the government budget to the tobacco industry.[10]

A news explainer on New Zealand’s decision to scrap its generational smoking ban notes that the incoming National-led government intended to use the money associated with the smokefree policies to help fund tax cuts.[2] The segment explains that by scrapping the ban, "New Zealand's government gets to keep that money and the money it makes from taxes on cigarette sales so it's a short-term bump to finances and enough to make up for the new tax cuts".[2] It does not mention any NZD 300m cash payment to tobacco companies, but rather continued collection of tobacco tax revenue.[2]