50 new schools, 75,000 social housing units: What a Freeze on tobacco tax could provide

A federal government freeze on the tobacco tax excise and crack down on illicit sellers stands to win them back more than $3.6 billion over the next four years.

The Federal Government could collect an additional $3.6 billion over the next four years if it froze the tax excise on cigarettes.

The new modelling, undertaken by Tulipwood Economics on behalf of the Australian Association of Convenience Stores (AACS), showed that this one simple measure could fund an additional 50 schools because more people would choose legal rather than illicit tobacco.

But if it freezed excise, allowed regulated vapes – as the Coalition have promised – and cracked down hard on illicit sellers, the Federal Government could win back more than $18.6 billion. State governments would also share in $2.3bn in additional GST revenue under the most extreme model.

The Federal Government could collect an additional $3.6 billion over the next four years. Picture: iStock

That could fund 75,000 social housing units, nine new major hospitals or 140 F-35 Fighter Jets to protect our shores.

Mark Butler, the federal health minister, said taxes on tobacco will never be reduced under a Labor government.

Theo Foukkare, CEO of AACS, said the federal government was fuelling the “out of control black market crisis” with two annual tax hikes each year on tobacco.

The latest rise, this month, sees customers paying more than $28 in tax for a packet of 20 cigarettes. A packet of illegal cigarettes costs $15.

And another planned hike in September will mean tax on tobacco will have risen a staggering 219 per cent in the past 10 years.

Regulated vapes and a tobacco tax freeze stands to benefit the economy and community. Picture: Pema Tamang Pakhrin

“The definition of insanity is doing the same thing over and over and expecting a different result,” Mr Foukkare said.

“This new report proves that year-on-year tobacco excise increases have driven smokers right into the grip of crime groups who are selling illegal, unregulated and dangerous tobacco and vaping products,”

The report also states that next year, the largest supplier of tobacco in Australia will be international crime groups selling illegal, unregulated cigarettes and vapes.

Mr Foukkare praised the Opposition for pledging to reintroduce regulated vapes – seen as many countries around the world as the best way to get smokers to quit cigarettes – and said the Coalition were the only ones willing to even listen about freezing the tax on tobacco.

Next year the largest supplier of tobacco in Australia will be international crime groups. Picture: iStock

“This is a national crisis. As the excise goes up, crime is sky rocketing, the rate of smokers who are quitting has flatlined and all while criminals continue to pocket billions in tax-free money,” Mr Foukkare said.

“We need a policy that ensures smokers are using legal, regulated and taxed products, with revenue going where it can be used for the good of Australia – instead of funding international crime groups,”

He added: “Banning vapes hasn’t worked – instead, vapes are illegally imported here from China, with no regulation, no taxation and no idea what insidious chemicals are even in them. They are everywhere.”

“The argument for frequent excise hikes has always been that it will encourage smokers to quit and raise government income to cover health related costs and public education quit smoking campaign – but instead, smokers are continuing to turn to the cheaper and illegal black-market product.

The state government would also receive $2.3bn under the new model. Picture: iStock

“The Federal Government needs to admit it has failed to take this crisis seriously and fix this now.”

Master Grocers Australia is also calling for a tax freeze.

An Industry expert said the federal government was “inadvertently funding criminal enterprises.”

“If the government just keeps on raising the excise there comes a critical juncture when taxation loses its effectiveness,” he said.

“The rampant rise of illicit retailers and the ensuing chaos on our streets are undeniable evidence that we reached this point years ago.”

They added: “It’s time to rethink the approach before the situation gets even worse.”