Illegal tobacco Cairns: New laws fail to deter cheap black market trade

Authorities have revealed the reason the black market tobacco is thriving in Queensland despite illicit traders being put on notice in May.

Unable to compete with illegal tobacco shops dodging government excise and selling smoking products at rock bottom prices, legitimate Cairns traders are desperately waiting for a promised crackdown on illicit trade and the shutdown of booming black market outlets.

Operating with impunity for years, illicit traders were put on notice in May when the state government announced the “arming” of authorities with a suite of reforms, including a licensing scheme to identify legitimate retailers and a new maximum penalty for supplying illicit tobacco of $43,125.

A Cairns tobacco seller supplies imported cigarettes without warnings.

Phase 1 of the reforms came into effect on June 2 and included establishing the supply of illicit tobacco as an offence and providing new controls on retail advertising and displays of smoking products.

A News Corp investigation earlier this year uncovered video evidence of city retailers in Cairns selling unbranded rolling tobacco known as chop-chop at heavily discounted rates alongside branded international cigarettes without mandated health warnings.

Since then more illicit pop-up shops selling under-the-counter products have opened for business in the CBD.

Under new laws claimed to “strike at the heart of illicit tobacco traders” Queensland Health officers were given the power to investigate and seize illegal tobacco products with the help of Queensland Police.

But in the months following the crackdown Lake St Free Choice Tobacco franchise holder Tim Hollman has watched his takings decline as two tobacco outlets peddle illicit products on his street.

Eight months after entering the market the illegal trade has been blamed for a 45 per cent reduction in takings.

“We are just banging our heads against the wall,” he said.

Franchise owner of Free Choice Tobacconist on Lake Street Tim Hollman is fed up with Cairns businesses selling illegal tobacco products tax free. He has reported the activity to both the state and federal government, but says neither are taking action. Picture: Brendan Radke

“My Free Choice agreement is up in February and honestly, if things don’t get back to normal we’ll give it a miss.”

Mr Hollman said he had flagged the illegal trade with the ATO, and raised concerns with his local MP and the office of Leichhardt MP Warren Entsch.

He said tobacco giants such as Imperial Brands, British American Tobacco and Phillip Morris have all been reporting the illegal trade.

“We report it to them and they report it on and still nothing’s done,” he said.

Mr Hollman said a multi-jurisdictional approach had caused major enforcement gaps and confusion about how to prosecute black market retailers.

“It’s no good saying they are going to do something about it, they’ve got to do it.”

Illegal loose leaf known as chop-chop is being sold in Cairns for a fraction of the cost compared with products on which government excise has been paid. Picture: Peter Carruthers

After previously remaining anonymous for fear of retaliation by organised crime networks that peddle illicit smoking products, TSG tobacco store owner Pam Wright is now speaking out about a black market trade she claims is killing legitimate business.

“Everyone is hurting, we are losing staff,” she said.

“If there was an industry where 25 per cent of the product was sold illegally the community would be in uproar, but not tobacco.”

While 50g of a popular brand of rolling tobacco such as Champion Ruby sells for about $110, illicit Cairns traders offer the same sized bag of chop-chop for $50.

Following a 15 per cent tobacco excise increase announced in May which is expected to raise $3.3bn during the next four years, Ms Wright said more expensive cigarettes would make it even harder for her businesses to compete with the black market trade.

According to the Australian Lottery and Newsagents Association skyrocketing black market sales rob the federal government of $4.2bn in excise each year from an estimated 300 outlets statewide.

A Cairns tobacconist allegedly selling illegal tobacco products.

There’s an estimated eight illegal outlets currently operating in Cairns, 10 in Townsville, two in Ayr, one each in Ingham and Innisfail and one in Mount Isa.

The association has called for the federal government to allocate more resources to support enforcement of state laws following a federal funding void to fund boots on the ground and the stamping out of the illegal trade, according to chief executive officer Ben Kearney.

“There is a strong disconnect between what the federal government is proposing and the lack of enforcement,” he said.

In January, Innisfail police cracked down on mammoth stash of illicit tobacco at an Owen Street motel and a shop on Ernest Street. Picture: Queensland Police

“We’re not opposed to the government’s measures, but they are playing into the criminal’s hands without resourcing and a strategy with the state governments on enforcement.”

Asked why authorities have to date failed to take enforcement action against sellers of black market tobacco, Queensland Health stated legislative changes are being phased in “gradually” to allow time for business to “understand their obligations”.

“Disrupting the supply of illicit tobacco requires a multi-pronged approach,” a spokesman said.

“Education is a critical component of any new enforcement activities, along with intelligence sharing with other relevant authorities.”

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Originally published as Illegal tobacco Cairns: New laws fail to deter cheap black market trade