Illegal tobacco to overtake legal smoking, report warns
Australians smoking illicit tobacco will outnumber those consuming legal products in two years, a report warns, as it’s predicted reforming Labor’s policy could generate $18.6bn in excise tax.
Australians smoking illicit tobacco will outnumber those consuming legal products within two years, a report has warned, as new modelling predicts that reforming Labor’s policy settings could generate $18.6bn in excise tax.
The Australian Association of Convenience Stores has raised concerns that lawful tobacco sales are in “terminal decline” amid a surge in black market imports, at a cost to the budget bottom line due to declining excise tax income.
The AACS, which has accepted funding from tobacco companies, has cautioned in a new report examining the “national crisis” that a fall in the consumption of legal nicotine products would cause excise tax revenue to fall by $700m between the next financial year and 2028-29.
Chief executive Theo Foukkare has called on the federal government to freeze the excise on tobacco products for four years, legalise and regulate smoking cessation tools, such as vapes and nicotine pouches, and bolster the crackdown on illegal tobacco.
Modelling by Tulipwood Economics predicts the implementation of these reforms would generate tax excise revenue of $50.1bn and GST of $6.2bn over the next four years, the equivalent of $20.9bn in additional government revenue.
Mr Foukkare said the government’s approach – banning vapes so they can only be sold by pharmacies via a GP prescription, and hiking the tobacco excise – had allowed criminal gangs to wage a deadly turf war across the country to sell cheaper illegal tobacco.
“The definition of insanity is doing the same thing over and over again and expecting a different outcome,” he said.
“The government, with their policy around tobacco excise and vaping prohibition, is doing exactly that.
“They’re doing more of the same and expecting a different outcome. But in actual fact, it’s getting worse.”
The report warned the rise in consumption of illegal tobacco – jumping from 2.6 million kilograms to 3.1 million kilograms in a decade – would see smokers using black market products outnumber legal smokers by 2026-27. This would make criminal cartels the largest supplier of tobacco products in Australia.
Mr Foukkare said while pausing rises in the tobacco excise might seem “counterintuitive”, the steep increase in price for a packet of cigarettes had driven smokers to cheaper illegal options rather than legal nicotine products during a cost-of-living crisis. He said the price difference between a black market and a lawfully acquired packet could be as stark as $9 compared to $40.
“The government can’t continue to put the price up, and keep taking billion-dollar hits at a time,” Mr Foukkare said.
“And then just let the criminal underworld actually take control of what has been a legal, regulated market for such a long period of time.
“In principle, we support the rationale behind the excise increases, which, in theory, was meant to do two things: encourage smokers to quit and raise revenue to support the health system, to support either smoking-related illness or stop smoking messaging.”
Health Minister Mark Butler said hiking the tobacco excise was “designed to encourage smokers to quit”, as smoking was one of the leading causes of preventable death and disability in Australia.
“Of course convenience stores would like to make cigarettes cheaper,” Mr Butler said.
“We’re under no illusions around the enormity of this task. We’re taking on Big Tobacco on the one hand and organised crime on the other.
“The Albanese government has invested more in enforcement in the last three years than the Coalition did in their 10 years in government.”
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