Simon Illingworth: Tobacco tax rise has led to illegal cigarette underworld turf wars

Tobacconists are the link between organised crime and smokers, so interrupting that link is the key — and the cure to this mayhem is simple.

On 17 May 2016, the Herald Sun published an opinion article I wrote titled ‘Crime gangs sense profits as the tobacco price rises’.

I explained how planned excessive tobacco tax rises would lead to gangland criminals “tripping over each other” to get into the illegal tobacco trade, the result of which would be a turf war.

The last paragraph in that piece covers it nicely: “I’m sorry to say this, but the new tobacco tax is the final ingredient in the recipe for another underworld turf war. Another fight over filthy lucre is coming. Murder, bashings, extortions and standover tactics will follow.”

Despite that dire prediction, not one politician, public servant or Government agency got in touch with me.

Instead, the government ignorantly pushed on with the tax grab and even lit the crime bosses’ cigars, by naively providing smokers with the Government’s plan to make cigarettes $50 a pack.

Cigarettes smuggled in from overseas can sell for less than $5 a pack. Picture John Grainger

In doing so, they telegraphed to crime bosses the profit to be made from contraband cigarettes smuggled from Indonesia and elsewhere where smokes sell legally for less than $5 a pack.

With the right supply lines, a bonanza awaited crime bosses; hundreds of millions could be made.

Government also ignored the need to police their prohibition-like crook magnet despite the signals.

Incredibly, it’s still not very clear whose job it is to police illegal tobacco at a local level, but it appears to have been given to local councils and other agencies known for carrying cardigans rather than ammo.

It doesn’t really matter because you’d question the ethics of any politician who thinks it’s OK to get any person to risk their life policing organised crime for tobacco tax evasion caused by an absurdly overcooked tobacco tax.

If tobacco is so bad, ban it.

Nevertheless, as I warned, the tentacles of organised crime began the day the tax creep started. The first organised crime faction with international links invested in the new black market and soon realised it had hit the jackpot: low risk, low jail sentences, unlicensed tobacconists, disinterested policing and massive profits.

Money began pouring in. An eye-watering $10m of profit per container smuggled. There are now hundreds of millions of dollars sloshing around in a slush fund cherry ripe for investment in proper “A” grade crimes, like MDMA importation and terrorism.

The lucre is so good in fact, that the first faction in it immediately attempted to monopolise distribution by “stamping” tobacconists with an “earn or burn” offer; Sell our smokes or we’ll torch your shop.

A tobacco shop, which was firebombed in an arson attack believed to be linked to recent spate of incidents. Picture: Luis Enrique Ascui

It’s never healthy to stand between a crime boss and a dollar, even less enticing during an underworld war caused by ignorant politicians and their agencies.

Today, tobacco related crime is rampant with standover tactics, arson and shootings. There’s been at least one kidnapping.

Embarrassingly, crooks are making hundreds of millions from it; even worse now, they fight over it.

Don’t get me wrong, I am not against sensible taxing of tobacco and clearly, the early price hikes had the desired effect of making some price-sensitive smokers quit.

But those people have given up, and yet the tax hikes continue? Undeniably the Government is wilfully blind.

We are now left with many low income hard-core smokers many of whom will go without food rather than give up smokes, indeed a massive percentage of all smokers now buy illegal tobacco from organised criminals, which is something they wouldn’t have dreamed of doing in the past.

They are just smokers, not bad people.

Whatever happens now, tobacconists are the link between organised crime and smokers, so interrupting that link is the key.

This can be done by licensing them and giving plain-clothed police the power to issue significant on-the-spot fines to tobacconists caught selling illegal chop-chop products.

You tackle these sorts of crimes by increasing the risk of detection. But enforcement is not the cure.

Politicians won’t like this, but the cure to this mayhem is simple; admit that the tax has gone too far and announce a reduction in the tobacco tax.

Set a reasonable, research-based tobacco price, one that is too cheap for criminals to smuggle in yet expensive enough to discourage smoking.

It would be a master anti-crime move that would immediately interrupt organised crime’s tobacco smuggling investment, leaving them with shipments of now devalued perishable tobacco in every stage of the supply chain.

Even if the government indicates they’ll reinstate the taxes whenever they choose, the price correction should be enough to put the genie back in the bottle.

Sometimes it pays to read the Herald Sun.

Simon Illingworth is a former homicide and anti-corruption detective and is now an international a speaker with ICMI