Tobacco excise revenue halves in five years to $7.8bn despite ‘some successful’ black market busts
Australia's tobacco tax revenue has plunged by more than $8 billion in five years as smokers either quit or turn to the illegal market.
Australia’s tobacco tax take has more than halved in just five years, with Treasurer Jim Chalmers saying he is under “no illusion” about the challenges faced in tackling the illegal cigarette market.
Final figures for the 2024-25 budget show the federal government made $7.8 billion on the tobacco excise — a modest $441m improvement on an estimate produced in March, though $3.75bn worse than what had originally been forecast last year.
The total revenue was less than half from the tobacco excise peak of $16.3bn in 2019-20, with Mr Chalmers citing two reasons for the decline.
“One of them is a good reason: people giving up cigarettes, one of them is a bad reason, which is people getting around the compliance regime,” he said.
Labor has invested more than $350m to bolster police efforts to disrupt the illegal tobacco market, and Mr Chalmers said there had been some “very welcome compliance activity” in recent months.
“We’ve seen … some successful busts when it comes to these people who are doing the wrong thing,” he said.
“But we’re under no illusion. We know that there is a challenge here.”
Mr Chalmers said the government did not believe cutting the excise, which adds about $35 to the cost of a 25 pack of cigarettes, would stop the illegal activity.
“But we do think compliance is a big part of the story, and that’s why we’re finding room for so much new investment in compliance for the police,” he said.
Mr Chalmers and Finance Minister Katy Gallagher released the final budget outcome for 2024-25 in Canberra on Monday, confirming a deficit of $10bn — Labor’s first since taking office.
Ms Gallagher said this was almost an $18bn improvement on predictions just before the May election, attributing the improvement to lower welfare payments and higher company and income tax receipts.
Gross debt is still forecast to cross the $1 trillion threshold for the first time in Australia’s history within the next nine months, but Mr Chalmers argued under figures produced by the Coalition the country had been due to hit that milestone “a couple of years ago”.
But Opposition treasury spokesman Ted O’Brien said Mr Chalmers was “fortunate” to have been the recipient of a $370bn windfall in revenue since Labor took office, suggesting Labor had squandered the opportunity by not banking all the extra money from things like higher commodity prices.
“All of that should have been used to pay down debt, but instead, this treasurer decided to put his hand in the cookie jar, and he’s committed around $100bn of spending,” he said.
Households doing it tough are unlikely to receive further mortgage reprieve this month with the Reserve Bank of Australia (RBA) board expected to keep interests rates on hold when they meet on Tuesday.
Higher than expected inflation figures released last month have scuppered hopes of a cut this month, with economists now pointing to November as the next likely opportunity.
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Originally published as Tobacco excise revenue halves in five years to $7.8bn despite ‘some successful’ black market busts
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