‘Worst in the world’: Gangs control Australia’s tobacco market, says global boss
Australia’s tobacco trade has been hijacked by criminals in the world’s worst case, warns a global Big Tobacco boss who accuses Labor of losing control to violent gangs.
Australia’s black-market tobacco crisis has reached a level of criminality unmatched anywhere in the world, according to a senior global executive at a cigarette manufacturer, who says the Albanese government has turned the nation into a case study in failed regulation.
In an interview with The Australian from his London office, British American Tobacco chief corporate officer Kingsley Wheaton said Australia faced the worst tobacco crime problem he had seen in his global role, warning that criminal gangs had effectively seized control of the nation’s nicotine market.
The rare intervention by Mr Wheaton, who oversees BAT’s global corporate strategy, highlights Australia as a global outlier in the scale and visibility of its illicit tobacco trade – with gang violence and firebombings becoming a major public safety concern that eclipses similar black-market problems in the UK, Brazil and South Africa.
What was once an under-the-counter problem was now “hiding in plain sight,” Mr Wheaton said. Street-level sales of illegal cigarettes and vapes in Sydney and Melbourne had become “overt, brazen and socially corrosive”.
BAT, the second-largest tobacco company in the world, which operates in 150 countries, estimates that 65 per cent of all cigarettes sold in Australia are illegal, and that up to 80 per cent of the nicotine market – including vapes – is now controlled by the black market.
Mr Wheaton said he came to Australia this year to see the scale of the illicit market first-hand, but was unprepared for the level of criminality that accompanied it.
“I was pretty shocked,” he said. “It’s the worst I’ve seen. I’ve not seen or heard of firebombings, retribution or gang warfare on this level before in any market. The UK, for example, has a longstanding illicit problem – maybe a third of the market – but it’s not creating the level of social upheaval we’re seeing in Australia.
“I’m not saying that the illicit trade isn’t fairly nefarious around the world; it is. But I’ve not seen such a public and a social manifestation of that criminality.”
Mr Wheaton said he had not encountered another country where the tobacco trade had become so deeply intertwined with violent organised crime.
“I’ve seen illicit trade in places like South Africa, Malaysia, Brazil and Romania,” he said. “But none of those have seen the kind of public violence or community fear that’s playing out in Australia.”
Exiled Iraqi criminal Kazem “Kaz” Hamad sits at the centre of Australia’s black-market tobacco empire – a shadow regulator whose influence stretches far beyond the reach of government or law enforcement. Under his direction, an organised web of Middle Eastern crime families and outlaw gangs has turned illicit tobacco into one of the country’s most lucrative and violent criminal trades.
Hamad’s network dictates everything from the price of a pouch to who can sell it, where it’s sold, and even what flavours hit the market.
In suburbs across the major state capital cities, he is regarded as the de facto authority on tobacco and nicotine – a man whose word can shutter a shop overnight or ignite a turf war by morning.
The feared tobacco boss has also been linked to helping IRGC-Quds Force commander Sardar Ammar in targeting the Adass Israel synagogue in Melbourne’s Ripponlea, as well as multiple murders – showing how the tobacco war has become a deadly nexus of organised crime and terror activity.
On Tuesday, Victoria Police announced Hamad’s uncle, Majid Jabal, was taken into custody and was expected to be charged on summons for his alleged role in the illicit tobacco trade. Investigators believe Mr Jabal is likely the “onshore lieutenant for (Hamad’s) criminality in both Victoria and Australia including arsons, extensions and unexplained wealth”.
Hamad’s iron grip on Australia’s underworld black market has strengthened, as he has built an empire believed to be worth more than $1.2bn in just two years, making him a top target for the Australian Federal Police.
Mr Wheaton accused Labor of “failing to confront reality” and warned that prohibitionist thinking in Canberra was compounding the problem.
“This is a fundamentally simple economic problem,” he said. “Consumers are presented with a $40 legal pack of cigarettes and a $15 illegal pack. The cross-elasticity of demand speaks for itself … they’ll choose the cheaper option.”
He said plain-packaging laws and other “draconian restrictions” had also made legal products less appealing.
“Not only are you paying $40, you’re paying it for a highly regulated, plain, standardised pack, while the illicit products look fully branded and unregulated,” Mr Wheaton said.
“It’s a double whammy.”
Mr Wheaton said the only realistic path to curbing criminal activity and regaining control of the market was to overhaul current policy settings. He argued that scaling excise back to about 2019 levels would go a long way toward stabilising the situation, and that taxation, regulation and enforcement must operate in tandem rather than in conflict.
Asked whether the situation in Australia remained commercially sustainable for BAT, a 125-year-old company, Mr Wheaton said it was becoming “increasingly difficult”, but the tobacco conglomerate would remain resilient and committed to working with governments to reform and restore a well-regulated market.
Australia had long been a profitable market, he said, but warned the dominance of the black market was eroding that position and making the nation’s method of regulating tobacco among the “worst examples” in the world.
“When two-thirds of the cigarette market and 80 per cent of the nicotine market are illicit, it makes the future shaky,” he said. “The prognosis, with this level of illicit trade, is not great.”
In the latest incidents linked to the tobacco wars, a BMW SUV was sprayed with bullets in Glenroy, in Melbourne’s outer northwest in the early hours of Monday. The business was formerly called Glenroy Cigarettes and had been subjected to repeated firebombings and a drive-by shooting over the past 18 months.
In Adelaide, a Mediterranean supermarket was burned in Torrensville while it was open last week, with a worker and the arsonist both caught alight in the chaos and captured on CCTV screaming in pain.
The escalating crisis has seen Treasury downgrade expectations for the tobacco tax take by nearly $7bn, despite the excise having increased to about $28 per packet – a 75 per cent rise since 2019. That tax represents more than half of the cost of an average 20 pack of cigarettes, which is selling at between $35 and $50, compared with $13 to $18 on black market.
Taxes collected through the commonwealth excise are expected to drop to $6.7bn by 2029 compared with more than $16bn a decade ago, according to the latest estimates from FTI Consulting.
The government is likely to come under pressure over the issue again by December, when the mid-year economic and fiscal outlook will once again show the record-low tax take from the tobacco excise.
More Coverage
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout