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The Pamphlet Collection of Sir Robert Stout: Volume 73

General Effects of a Tobacco Factory on the Revenue

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General Effects of a Tobacco Factory on the Revenue.

As a result of the introduction of the tobacco industry in Australia, there are now 27 factories in the Australian colonies, involving an investment of some £900,000 capital.

The crop is estimated at 2,731,344lbs, and the approximate value is £70,000 per annum. From the fiscal point of view I wish to say that some people hold that the protection of this industry would seriously interfere with the revenue derived from the duty on imported tobacco; but, in reply to that, I might say that such has not proved to be the case in the Australian colonies, because, after allowing for the increase in population, the cheapening of the article leads to a more extensive and liberal use of it. To illustrate this, I may say that while in 1885 the import of tobacco into New South Wales from America was 350,000lbs, in 1893 it was about 975,000lbs, notwithstanding that the local factories produced about 2,000,000lbs per annum. Similar results have taken place in Queensland, where tobacco manufacturing was commenced as late as 1889. Previous to that practically no tobacco was grown in Queensland, but today the actual value of the tobacco crop is estimated at £30,000 per annum. In Victoria, where they have a duty of 3s per lb. on imported tobacco, 1s duty on American leaf, and 6d excise, the imported tobacco has held its own; and I would page 12 suggest, to prevent any falling-off of revenue, the following tariff, which I feel would increase the present returns, and allow ample protection for the pioneering of an industry employing so many workmen:—A duty of 4s per lb on American manufactured tobacco; a duty of 2s 6d per lb on American leaf going into bonded factories (this duty to last for three years); then an excise of 6d per lb to be imposed at the end of this period. In suggesting this to you, I would like to impress the fact that it would take fully 12 months after the passing of the Act to thoroughly build and equip a factory with machinery, and we would have only two years to introduce the locally-grown leaf in a smokeable form. To illustrate by figures the result of the above suggestion, the only New Zealand Government figures available are those contained in the Blue Book of 1893. In this year l,239,597lbs were consumed by a little over 700,000 inhabitants, yielding a revenue of £216,929. This additional 6d would increase this revenue by £30,990, being an adequate amount to compensate for any loss during the second two years of actual work done by the factories under the protection suggested, which bears the same differential duty as the present Victorian tariff. At the end of three years, when the local growth of tobacco is thoroughly accomplished and understood, an excise could be imposed of 6d. per lb., which would make American-manufactured leaf in New Zealand pay a duty of 3s. per lb., which is at present the case; or if the local leaf manufactured became so formidable to the tariff, which I have no doubt it will, it should be necessary to impose a heavy excise duty to compensate for any loss that might be sustained by a local article supplanting a foreign one. Of course you will thoroughly understand that there is always a strong prejudice against a local manufacture, which it takes hard work as well as skilful manufacture to overcome, and at the same time an investment of capital necessary to the commencement of operations, which are always attended by considerable initiatory expenses, and a certain amount of protection is therefore required. There should also be considered the fact that annually about £100,000 goes away from New Zealand to be distributed in labour and materials in other countries; this money kept in circulation here would materially increase the revenue by the purchases and consumption of other dutiable articles by those who work in and benefit by such industry.

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The Employment of Labour.

I have been informed that the experiment of a tobacco factory has already been tried in New Zealand, but I have reason to believe that the attempt has been inadequately made, and I am convinced with greater experience and more ample means and the employment of the best modern appliances, we shall be as successful in New Zealand as in the other Australian colonies, and I am under no apprehension that the considerable capital which we propose to invest will not prove unproductive. I especially wish to point out that the manufacture of pipe tobacco, which I propose to devote my attention to, is totally dissimilar to the cigarette business. Whilst we possess the exclusive right of the use in Australasia of one of the best cigarette machines of modern invention (which we propose to employ in New Zealand, as in Australia, in this remunerative branch of manufacture) I am prepared to admit that this portion of our industry stands on an exceptional footing, and is susceptible of special treatment. A cigarette is not, generally speaking, a working man's smoke; those who indulge in it can well afford to pay sixpence per packet, which has been and still is the standard retail price for imported cigarettes. The introduction of most ingenious labour-saving machines, almost entirely automatic in action, has enabled the local producer of cigarettes, under cover of the protection afforded to the manufacturer of plug tobacco, to produce colonial cigarettes in enormous quantities, which have been placed on the market to be retailed at 3d per packet. This has led to a considerable increase in their consumption—largely, it is said, by youths and boys, to whom the premature use of tobacco is held to be deleterious. I would suggest, therefore, with all respect, that a substantial increase in the excise on cigarettes, which would bring this retail price back to sixpence per packet on the colonial product, would not appreciably effect the ordinary cigarette smoker, but it would check the consumption in a direction which is held by many to be an objection, and it would yield back to the revenue probably more than would be taken away by the suspension of the excise on the material which can be grown in the Colony. The duty on cigarettes manufactured in New Zealand at present by the American Trust is 3s 6d per lb. They manufacture 1000 cigarettes to 2lbs. of tobacco, while the duty on imported cigarettes is 7s per lb., and about 2½lbs. of tobacco is used. The duty amounts to page 14 17s 6d; clear protection 10s 6d per 1000 for this branch of the industry, which is done entirely by machinery and has deprived a large number of girls in this Colony from employment that, prior to this machinery, they were able to earn fair wages by. The machines can turn out, by the employment of one man and a boy, from 8000 to 10,000 cigarettes in an hour. This has deprived the country not only of revenue but of employment for a large number of hands and has enjoyed a heavy protection.

I quote from the New South Wales Statistical Register, for 1893 and previous years, "Manufactories and Work," the following tables:—
Year. Tobacco Factories. Hands Employed. Total Hands Employed.
Males. Females.
1891 11 449 163 612
1892 11 443 163 606
1893 11 452 142 594

In the factory which I had charge of in Sydney we employed about 190 hands, the pay roll for wages generally being from £240 to £280 per week, besides the large amount of repairs which had to be locally done, which extended the employment still further. And, in addition to this, the working in tobacco factories is a very healthy occupation, in no way affecting the labourer's health. The rate of wages is fixed by the unions, and is thoroughly satisfactory all over Australia.

I am familiar with your labour laws, and anticipate no difficulty in working under them.

The Selling Price of Tobacco.

It has at the present time become a necessity to the labourer, and to every other branch of the community, to use tobacco, and the introduction of a local factory will diminish the cost to the consumer. We will undertake to produce a well-manufactured tobacco, which would be acceptable to the consumer, at a more moderate cost than the imported article.


I desire to say I am not seeking anything in the nature of an exclusive concession or monopoly, and I have no doubt page 15 that our enterprise in New Zealand will be followed, as in the Australian colonies, by competitors, which will bring about further investment of capital in this Colony and extended employment, besides ensuring to the producer of leaf tobacco healthy competition in purchasers and a permanent and reliable market for their product.

Messrs Philips and Pike, National Mutual Buildings, Wellington, have in their possession some further information on the subject of this pamphlet, and they will be pleased to take charge of any correspondence dealing with the matter, or to supply any details that may have been omitted.


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Printed at the New Zealand Times Office, Lambton Quay.