The federal government is facing calls to make a major policy u-turn and either freeze or lower the tax on cigarettes to help curb a black market. Two Coalition MPs have broken from a longstanding bipartisan approach towards tobacco control policy, arguing the tax is so high, it's pushing smokers to the illicit trade and robbing taxpayers of billions of dollars in revenue.
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00:00Well, it's not easy to quantify, but here's what we know.
00:04The tax office said back in 2021 that the black market was no more than about 13% of
00:11the total market.
00:12The tobacco industry has a different view.
00:14It believes the black market is far higher and that nowadays as much as or as many as
00:19one in three or one in four tobacco products purchased in Australia is being purchased
00:24through the black market.
00:26Now successive governments have used steep increases in the tobacco excise to drive down
00:31smoking rates in Australia.
00:33But if you look at the budget papers in recent years, as the excise has increased substantially
00:39pushing the price of a pack of cigarettes to about $50, the tax revenue has plunged.
00:44It is billions, billions of dollars lower than even Treasury's forecasts.
00:49And while of course people in that time have quit smoking, overall smoking rates in Australia
00:54have remained relatively stable.
00:57So what these figures suggest is that there is a growing group of Australians who are
01:01shifting to the black market to purchase their cigarettes.
01:06We also know that the number of illegally imported cigarettes being seized and destroyed
01:11by the federal illicit tobacco task force has exploded.
01:15It was something like 1.4 billion illegal cigarette sticks last year alone.
01:20And then there've also been visible signs of the growth in the black market.
01:24We've seen tobacconists popping up on streets from country towns to big cities across Australia.
01:30And in Victoria, of course, it's taken a very dark and dangerous turn.
01:33More than 105 tobacconists or tobacco shops have been firebombed in the state in the past
01:3918 months as part of a kind of turf war between rival gangs who are vying for control of what's
01:45become a pretty lucrative market.
01:47Well, given the proliferation in tobacconists across the country and the violence that we're
01:52seeing in the southern states, Queensland Coalition MPs Warren Ensch and Lou O'Brien
01:57say legitimate businesses are going broke.
02:00Something has got to give in their view.
02:03And they're calling on the government to at least consider lowering the tobacco excise.
02:07Now, Australia has one of the highest tobacco excises in the world.
02:11If a pack of cigarettes costs about $50, well, the tax alone on that pack is $33.
02:18We know that illicit tobacco is now widely available and is being sold for about half
02:23that price.
02:24So Mr. Ensch and Mr. O'Brien believe if the government can narrow the gap a little between
02:29the legal and illegal product, well, then perhaps the more law-abiding smokers might
02:35shift back to the regulated and legal market and actually pay the excise, which then obviously
02:41benefits all taxpayers.
02:45Now, the Albanese government is actually increasing the excise over and above the ordinary indexation
02:51for three years as part of a broader strategy to try and drive down smoking rates from about
02:5510% now to 5% by 2030.
02:59For his part, economist Chris Richardson reckons those increases won't have the desired effect.
03:07He says successive governments have focused far too heavily on the tax component of this
03:12policy to try and drive down smoking rates, change people's behaviour, and they haven't
03:16focused enough on the law enforcement part to try and effectively make a dent in the
03:21black market.
03:22So Mr. Richardson reckons the tax should at least be frozen at its current level while
03:27the law enforcement side of the equation catches up.
03:30Will public health experts flatly reject any moves to tinker with the tax?
03:35Smoking is of course harmful.
03:37Smoking tobacco is harmful.
03:39It's the leading cause of preventable illness and death in Australia each year.
03:44And the Cancer Council says the high price of cigarettes in Australia is a key reason
03:49why people quit and is also a key reason why people don't take up the habit in the first
03:55place and they argue that successive increases in the tobacco excise have really been the
04:00cornerstone of tobacco control efforts in Australia and have helped drive down smoking
04:06rates.
04:07Both major parties have in recent months committed more money, more resources, or at least promised
04:14to, to the law enforcement side.
04:16At this stage, neither is really publicly entertaining the idea of any adjustments to
04:21the tobacco excise.