Tobacco black market sending billions up in smoke
Illegal tobacco is burning a $4 billion hole in Australia’s pocket; The rapidly increasing tobacco tax is accused of fueling the underground trade and escalating violence.
Reports from the Australian Criminal Intelligence Commission and the Australian Institute of Criminology reveal the national scale and cost of serious and organized crime.
The direct and indirect costs of organized crime to Australia have risen from $68.7 billion in 12 months to $82.3 billion in the 2023/24 financial year.
The cost of illicit tobacco to the Australian economy is estimated to have quadrupled in the last three years to $4 billion.
Of this figure, $3.3 billion was due to lost tax revenue from the tobacco excise tax, and the remainder was due to related healthcare expenses and reduced productivity.
Heather Cook, the commission’s chief executive, said efforts by organized crime groups to control the illicit tobacco and vaping market had led to 200 firebombs, at least three murders and countless acts of intimidation and extortion.
“Legitimate businesses have been forced to close their doors,” he said in a speech at Canberra’s National Guard College on Thursday evening.
“Billions of dollars in lost tax revenue means less money for hospitals, schools and essential services.
“Organised crime syndicates then convert these illicit proceeds into a range of other criminal activities, further impacting community safety, security and the wider social fabric.”
Ms Cook added that the violence could not be controlled, spilling into the streets and affecting the surrounding area and entire neighbourhoods.
Tobacco sales at Ritchies IGA’s 156 stores in Victoria, NSW and Queensland grew from $300 million to $60 million in four years.
Woolworths’ tobacco sales fell 51 per cent in the September quarter compared to the same period last year, while Coles recorded a 30 per cent decline in the last financial year.
This follows a sharp increase in the federal tax on tobacco to $1.50 per stick, with the average cost of a legal over-the-counter pack of 20 cigarettes in Australia rising to over $40.
Australian Convenience Stores Association chief executive Theo Foukkare said until four years ago legal tobacco contributed to about 40 per cent of non-fuel sales at service stations and corner stores.
Mr Foukkare pointed to the federal government’s decision in 2019 to eliminate tobacco tax by 55 per cent over three years on public health grounds, with the rate falling to around 15 per cent.
“Criminal groups are in a smuggler’s paradise,” he told ABC Radio.
“We have the highest consumption tax in the world. Until recently we had very limited enforcement, which included meaningless fines and virtually no prosecutions.”
The federal government created a multi-agency national tobacco interdiction task force in October after tobacco excise tax revenues plummeted.
Two stores in Sydney’s north were the first to be closed under new NSW health powers for selling illegal vaping and tobacco products.
NSW Health inspectors, who issued closure orders during raids on Tuesday, seized 3860 illegal cigarettes and 224 illegal e-cigarettes in both stores.
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