Tele’s take: Cheaper cigarettes might mean more government money

The massive excise on legal tobacco has allowed a black market to flourish across NSW, but a reasonable reduction in excise could lead to a substantial boost in revenue. Here’s the Tele’s take.

The Foodie Convenience Store on Macquarie Street. Located directly opposite NSW Parliament House. Picture: Jonathan Ng

• Mapped: 500+ illicit smoke shops across Sydney revealed

Talk about brazen. Directly opposite state parliament on Macquarie St, The Daily Telegraph yesterday discovered a convenience store selling illegal cigarettes and vapes.

This single venue’s tobacco operation, and its bold-as-brass location, tells us a great deal about the illegal tobacco and vape caper as it functions in NSW.

Most obviously, law breakers obviously feel that the risk of punishment for breaking the law – and the punishments themselves – are insufficient to deter participation in what is a very lucrative illicit trade.

And secondly, the widespread nature of illegal cigarettes and vapes shows the existence of a gigantic black market.

Students of criminal history will at this point be put in mind of the alcohol prohibition era in the United States.

The ban on booze led to the launch of illegal “speakeasy” bars across the country.

The government was denied any revenue from alcohol sales that possibly even increased in some areas.

One popular post-prohibition joke expressed disappointment that drinks were no longer served on Sundays.

‘Rolled gold taxation’ by Warren Brown

In the case of NSW and tobacco, the federal excise on cigarettes and other tobacco products has driven the price so high that smokers are looking outside their usual legal outlets.

As Premier Chris Minns puts it, the massive excise on legal tobacco has allowed a black market to flourish “on every street in every suburb in NSW”.

A reduction in that excise would bring smokers back to legal suppliers – and, very importantly, back to contributing excise cash to the Australian tax base.

Presently, illicit tobacco sales in Australia come to nearly 40 per cent of the total tobacco figure.

This means that potential revenue is down by some $6.7bn – money that could be used in the health sector for all Australians, including smokers themselves.

A reasonable reduction in excise could lead to a substantial boost in revenue. It’s counterintuitive, to be sure, but cheaper smokes might mean more government money.

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