Tobacco tax cut ‘no fix’ to $4b smugglers’ paradise
Callum Godde |
Illegal tobacco is burning a $4 billion hole in Australia’s hip pocket but policy boffins are sceptical lowering the tax on legal cigarettes will stop the rot.
The economic cost of organised crime to Australia jumped to $82.3 billion in 2023/24, up from $68.7 billion in the previous 12 months, reports from the Australian Criminal Intelligence Commission and Australian Institute of Criminology show.
Illicit tobacco’s estimated economic cost rose to $4 billion, a four-fold increase in the past three years.
Of that figure, $3.3 billion was the result of lost tax revenue from the tobacco excise.
Organised crime groups’ efforts to control the illicit tobacco and vape market have led to more than 200 fire bombings, at least three murders and countless acts of intimidation and extortion, the commission’s chief executive Heather Cook said.
“Legitimate businesses have been forced to close their doors,” she said in a speech at Canberra’s National Security College on Thursday evening.
“Billions of dollars in lost tax revenue means less money for hospitals, schools and essential services.”
Violence from illegal tobacco turf wars had spilled into the streets and impacted bystanders and entire neighbourhoods, Ms Cook said.
Dramatically declining cigarette sales at major supermarkets and stores have coincided with the federal tax on tobacco rising to $1.50 per stick, pushing the average cost of a legal pack of 20 past $40.
Australian Association of Convenience Stores chief executive Theo Foukkare said legal tobacco accounted for about 40 per cent of all non-fuel sales at service stations and corner stores four years ago but has fallen to roughly 15 per cent.
“It’s a smugglers’ paradise,” he told AAP.
“You can get an illegal pack for as cheap as $7.50 or about $15 on average.”
Mr Foukkare is calling for the excise to be halved to close the gap, along with uniform laws and enforcement across the country.
“The federal government are looking at it solely as a health issue. They’re ignoring the fact that this is a national crime crisis,” he said.
“If the same approach is maintained, within three years we strongly believe … there will be no legal tobacco industry in Australia.”
However, tobacco control policy experts argue reducing the excise to compete with illicit sellers won’t fix the problem.
“It will serve only to make illicit tobacco even cheaper and, even worse, could drive up smoking rates,” University of Sydney public health school professor Becky Freeman said.
“We can and must control the illicit tobacco market without sacrificing public health.”
Prof Freeman said fewer than one in 10 Australians smoked daily but cigarettes were sold on just about every street corner and people were “sick of seeing tobacconists pop up everywhere”.
“It’s time to ‘shut the shops’ and cut the number of stores allowed to profit from this harmful product,” she said.
The Australian Medical Association has branded arguments to reduce the excise “dangerous, misguided and simplistic”, with University of Queensland professor Coral Gartner predicting it would make the problem worse.
“The production costs of cigarettes are so low that criminals can still undercut the legal price even in countries with much lower tobacco taxes,” the international tobacco control policy expert said.
When some Canadian provinces reduced their tobacco tax in a bid to reduce smuggling in the 1990s, Prof Gartner noted it led to more smoking among young people.
NSW Premier Chris Minns has previously advocated for a review of the excise but Treasurer Jim Chalmers was unwilling to budge and instead poured millions of dollars into extra enforcement and compliance.
“Our investments have made a meaningful difference in combating the black market and led to significant busts in recent weeks,” a federal government spokesman said.
AAP
