‘Simple’ tax solution dismissed as illegal tobacco cure
Australia’s tobacco commissioner faces scrutiny over claims changes to cigarette excise duty will not curb the illegal tobacco trade.
Tensions over the consumption tax are rising as states and economists pressure the federal government to consider freezing the policy.
The increase in the federal tax to $1.50 per cigarette has caused many of the nation’s 1.7 million daily smokers to turn to cheaper options on the burgeoning black market.
While Commissioner Amber Shuhyta acknowledged Friday that the tax was a factor in the widening price gap, she argued that she was focusing her attention elsewhere.
The solution lies in stronger inter-agency cooperation, centralized data and intelligence sharing, and stricter legislative and licensing reforms, he said.
“I’m trying to give a more comprehensive picture of a trusted source of advice for the government,” Ms Shuhyta told the parliamentary inquiry into illegal tobacco in NSW.
“In the evidence before me, excise duty has not been found to be the sole or primary cause of this problem. If it were that simple, I would make this recommendation to the government.”
“When looking at consumption tax I also need to consider the health implications for Australia, it’s not just a fiscal problem that needs to be solved.”
Consumption income has fallen sharply from its peak of $16.3 billion in 2019/20; The treasury is estimated to be 5.5 billion dollars for 2025/26.
A threefold increase in the rate of private consumption over the past decade has pushed the average price of a pack of legal cigarettes to $50, while the black market equivalent can easily be purchased for under $15.
Australian cigarettes are among the least legally available to purchase in the world, fueling an underground war to control the lucrative illicit market.
The incident led to 200 firebombings, at least three murders and countless acts of intimidation and extortion, Australian Criminal Intelligence Commission chief Heather Cook said in a speech in November.
Ms. Shuhyta said there was no evidence to prove that changing the excise tax would reduce illegal trade.
“I have nothing to prove what difference the price change will make,” he said.
“There are many countries around the world that have very different consumption tax regulations but very large illicit markets.”
The inquiry heard that strengthened law enforcement activities in the past year had helped curb illegal trade.
Border Force said investigators were detecting illicit tobacco at airports and cargo ports at least 50 times a day.
More than a billion illicit cigarettes have been prevented from entering Australia in the last six months of 2025.
The issue has been identified by new federal opposition leader Angus Taylor as a key area of policy development ahead of the 2028 election.
It comes after the Liberals successfully prosecuted the issue in NSW and won bipartisan support in a crackdown on black market tobacco dealers and under-the-counter dealers.
NSW Premier Chris Minns has demanded consumption cuts but has yet to convince federal Treasurer Jim Chalmers they will prevent illegal activity.
But Finance Minister Katy Gallagher left the door open to change when asked about the Senate estimates last week.
“The government is keeping all these matters under review,” he said.
Steady excise tax increases and other anti-tobacco measures over the past three decades have been credited with contributing to lower smoking rates.
In 2023, approximately 8.3 per cent of Australians over the age of 13 were daily smokers; That’s down from 11 percent in 2019 and less than half the rate in 2001.
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