Whopping $1bn haul from Victoria’s illegal tobacco trade revealed

Organised crime bosses have snared a $1bn-plus Victorian windfall in three years from illicit tobacco rackets.

Organised crime bosses have snared a $1bn-plus Victorian windfall in three years from illicit tobacco rackets.

Industry figures say they have taken a 20 per cent chunk out of the national legal smoke trade, which is dominated by supermarkets and convenience stores.

Figures from the Australian Association of Convenience Stores show its constituency and service stations lost just under $800m in sales between 2020 and 2023.

Based on its market share, the AACS’s projections show that would represent a $3.5bn slump in tobacco sales across all outlets.

Department of Health smoking rates have remained stable in that time, leading the AACS to conclude the illegal sector has taken that revenue.

The AACS estimates Victoria’s inordinately high rate of illicit trade means it would account for a $1.4bn slice of that.

Organised crime bosses have snared a $1bn-plus Victorian windfall in three years from illicit tobacco rackets. Picture: ATO

The illegal operators charge about half price for a packet of cigarettes but they benefit from huge mark-ups on their foreign-purchased stock.

Unlike their rivals, they often insist on cash sales, pay no tax, frequently give cash-in-hand wages to staff and do not observe other costly workplace obligations.

Illicit profits are further swollen by sales of vapes, which have exploded in recent years.

Vapes are expected to become an even more valuable contraband commodity after being banned last month.

The illegal shops also sell vast amounts of chop-chop, loose leaf tobacco which is grown domestically on secret farms or imported from overseas.

Ritchies IGA CEO Fred Harrison told the Herald Sun that Victoria led the crooked smoke sector.

“We believe the 1000-plus illegal retailers are about a third of all illegal retailers in Australia,” Mr Ritchie said.

Illicit profits are further swollen by sales of vapes, which have exploded in recent years. Picture: iStock

A number of factors have created a perfect storm for the syndicates to make huge money.

Skyrocketing taxation has rapidly driven up the price of legal tobacco products, driving customers in their droves towards the outlaw trade.

A lack of any licensing regime in Victoria has meant the number of shops selling illicit product has soared from about 50 five years ago to more than 1000.

Enforcement was left to council officials who were often reluctant to take action because they knew shops were run by organised crime.

Vapes are expected to become an even more valuable contraband commodity after being banned last month. Picture: iStock

AACS chief executive Theo Foukkare said organised crime groups were the beneficiaries of loose licensing laws.

“The Health Department’s numbers speak for themselves – Victorians aren’t quitting tobacco – they’re buying it from the black market instead,” he said.

“More than a billion dollars is being funnelled into the Victorian illegal nicotine black market, which is selling completely unregulated and unsafe products to whoever will buy them, including minors.”

The money to be made from the importation of tobacco was shown in a 2022 Australian Criminal Intelligence Commission report.

It stated that criminal syndicates only needed to have one in 30 shipments make it through border controls to make a profit.

Victoria had a dominant syndicate which operated in a relatively low-key fashion until March last year.

Ritchies IGA CEO Fred Harrison says Victoria leads the crooked smoke sector. Picture: Adam Hourigan

That was when a long chain of firebombings began, suspected of being orchestrated in an aggressive intervention by exiled crime kingpin Kazem Hamad.

More than 30 businesses, mostly smoke shops but also non-tobacco targets, were hit.

Investigators believe Hamad, who is living in the Middle-East, remains a major player.

An Epping man arrested this week for allegedly ordering blazes which did millions of dollars of damage to a Docklands restaurant, a Glenroy tobacconist and a Tullamarine reception centre is suspected of acting under his instructions.

Detective Inspector Graham Banks did not name Hamad but it was clear who he was talking about after the arrest.

“We’re saying this person (the arrested man) has direct contact with the person who was directing all the harm from overseas and is then co-ordinating that harm in Victoria.