Should tobacconists exist? Labor minister Julian Hill poses radical question in illegal cigarette war
Labor has floated the radical idea of shutting down tobacconists so that cigarettes are only sold in places such as supermarkets as a way of curbing the burgeoning tobacco black market, while also announcing new laws to crack down on tobacco kingpins.
Customs deputy minister Julian Hill questions the existence of small tobacconists in areas where crime and firebombing are rising, although he has closed the door on the slim possibility of cutting tobacco duty to make legal cigarette prices more competitive with illicit products.
“Health advocates are also doing interesting work questioning why our society continues to allow independent tobacconists,” Hill said in a speech in Canberra on Thursday.
“Australia currently has around 40,000 tobacco retailers serving around 8 per cent of the smoking population, compared to around 7,000 petrol stations serving around 70 per cent of Australians who drive.
“This imbalance raises the question of whether tobacco products should be sold only in mixed-use retail environments, subject to more stringent licensing, oversight and compliance. Interesting questions for the future.”
In his wide-ranging speech on tobacco control, Hill announced that the government would introduce tougher penalties and new laws allowing police to use wiretaps and quickly seize the cars and homes of tobacco criminals, treating tobacco bosses like drug lords in a national initiative to make illicit tobacco riskier and less profitable.
Hill will say South Australia and Queensland have helped the legal tobacco trade by enabling officers to target the black market and extensively patrol certain areas. Victoria, where there are far fewer officers knocking on store doors, is struggling to reduce criminal sales.
Revenue from tobacco sales, the fourth largest source of revenue for the federal budget at the beginning of the decade, has collapsed even as the rate of private consumption per cigarette has increased.
This fiscal year alone, the tobacco excise tax, originally expected to generate $14.2 billion in revenue, is expected to generate only $5.5 billion. By the end of the decade, the decline in legal cigarette use will have created a $67 billion hole in the budget.
The combination of global tobacco oversupply and active criminal networks in the Middle East and Asia has increased criminal activity. While more than 130 tobacco shops were bombed in Melbourne in the fight over illegal cigarettes, years of efforts to wean the population away from tobacco were in vain.
Federal authorities seized 2.6 billion cigarettes last fiscal year; That’s tripled from four years ago, but the government has acknowledged it can’t solve the problem at the border and is overhauling federal law to make authorities more nimble.
The government will change customs, excise and tax administration laws over the next two weeks to double or even triple penalties for illegal tobacco-related offenses, up to five to 15 years in prison..
Increasing penalties to this level puts criminals who smoke illegally in the same class as the most serious criminals and allows authorities to use the most advanced investigative techniques.
“Hitting criminals where it hurts means using every tool: taking away their profits, their cars, their money, their homes, their boats and their toys more quickly. This will mean aligning Commonwealth frameworks closely with other jurisdictions,” Hill will say.
“Al Capone was imprisoned for tax evasion, not for his violent crimes.”
The massive evasion of excise duty has led NSW Premier Chris Minns, some opposition MPs and tobacco selling companies to call on the government to cut excise duties on legal cigarette packs, which cost between $50 and $60, to bring them closer to the price of black market packs that can retail for around $15.
Analysis published by Oxford Economics earlier this year warned that without a cut in excise duty, revenue from tobacco could fall to just $1.5 billion and 90 per cent of all cigarettes were likely to be bought on the black market.
It found that reducing excise duty rates to their 2019 level would reduce the price of a pack of cigarettes by a third and stabilize the legal cigarette market.
However, various health groups and some academic studies point out that even if legal cigarettes were made slightly cheaper, the price difference would remain too high to change consumer behavior.
Hill rubbished quiet speculation that Labor was considering cutting consumption tax; This possibility was brought to fruition when Senate estimates emerged that the Treasury was modeling changes to the excise tax.
“As of now, based on available information and advice given to the government, there is no reasonable excise tax cut that would make a material difference to the ubiquitous illicit supply chains and distribution networks operated by organized crime,” Hill said.
“Giving up is not an option, nor is being distracted or seduced by false hopes and false claims about consumption reductions.
“What does success look like? Fewer storefronts linked to illicit networks. An end to firebombings. Fewer incidents of violence. Reduced illicit share of the tobacco and e-cigarette market. Increased prices of illicit products. Stronger excise tax compliance. More proceeds of crime recovered. And most importantly, safer communities and a fairer working environment for honest retailers and employees.”
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Paul Sakkal is the chief political correspondent. It has previously covered Victorian politics and won the Walkley and Quill awards. Reach him securely on Signal @paulsakkal.14Connect with: X or email.
Shane Wright is senior economic correspondent for The Age and The Sydney Morning Herald.Connect with: X or email.
