Australia’s $5bn tobacco black market has exploded in recent years thanks to an excise of about $28 per $50 pack of cigarettes, compared to illegal products that sell for less than $20.
In a submission to a parliamentary inquiry investigating the issue, international tobacco giant Phillip Morris said that without a correction on government policy public revenue will continue being eroded while more Australians smoke illegal and unregulated cigarettes and vapes.
“Illicit tobacco consumption is projected to cross the 70 per cent threshold (of total consumption) in 2027,” the submission said. “The rate of consumer migration to illicit supply is accelerating aggressively and remains in motion. Without reform, this displacement is expected to worsen beyond the point where it can be readily reversed.
“We urge the committee to consider whether this trajectory – and its resulting consequences – represents an acceptable outcome for public policy makers, the federal government, law enforcement agencies, health departments and the broader Australian community.”
As uptake of illegal smokes and vapes increases, revenue generated by the excise on legal products is plummeting, with estimates the trend will have seen $65bn lost from the budget by the end of the decade.
While Liberals responsible for shaping the opposition’s policy on the tobacco black market have indicated an openness to reducing the excise by between 30 and 50 per cent, Labor has rebuffed calls for such a policy change and argued it would make no difference given the inability to close the yawning cost difference between legal and illegal products.
This is despite one of the Liberal illegal tobacco task force co-chairs, Richard Colbeck, pointing out that the Middle East conflict had constrained illegal supply and seen costs in the black market double, presenting what he called an “opportunity” for government to act.
Phillip Morris said that, without action in the next year or two, no amount of reform would make a difference. “Should the current trajectory of decline continue, supply of all tobacco and nicotine products in Australia will almost exclusively be provided by organised crime by 2030,” it said.
“Australia has one of the most lucrative illicit nicotine markets anywhere in the world, which has attracted a vast and dangerous organised crime industry. Efforts to control territory and supply have precipitated violent competition between rival criminal groups, including intimidation, coercion and retribution against retailers and competitors.”
The warning follows more than 200 arson attacks over the past 18 months, stemming from gang wars for control over the illicit market. The Australian Border Force said it expected such incidents to continue and that curbing the black market was not possible with investments in law enforcement alone.
