Tobacco tax cut lit up as black market trade ‘solution’
The federal government is opposing growing calls to overhaul tobacco duty as the extent of Australia’s black market trade becomes clear.
Data showing that four out of five e-cigarettes and cigarettes consumed in Australia in 2025 were purchased from the black market has brought new discussions on reducing cigarette consumption to the agenda again. tobacco tax.
According to the Australian Bureau of Statistics, the black market share of total nicotine consumption increased from 12 percent to 80 percent from 2017 to 2025.
Victoria’s Minister for Casino, Gaming and Liquor Regulation Enver Erdogan, who introduced legislation giving state tobacco regulators the power to shut down dodgy retailers, admitted excise duty had contributed to the problem.
“The statistics speak for themselves,” he told reporters in state parliament on Thursday.
“I will say that is a factor in growth. I think that is undeniable.”
Tobacco taxes have tripled in the last decade to $1.52 per cigarette, pushing the average price of a legal pack of 25 to over $50.
Over-the-counter black market equivalents sell for less than half that price.
Estimates released in May’s federal budget revealed that the tobacco black market had wiped out $6 billion in tax revenues in the five months since the previous fiscal update in December.
The excise tax is projected to fall to just over $2 billion a year by 2030, after generating more than $16 billion in 2020.
At the time, NSW Premier Chris Minns renewed his call for the federal government to review the consumption tax on the grounds that it was “not working”.
“This is the only tax in the world where it doubles but the revenue is halved,” Mr. Minns said.
Mr Erdogan stopped short of joining the industry’s calls for excise duty to be reduced, saying Victoria was focusing on more enforcement.
“We want to protect legitimate businesses but the industry is telling us they believe price is the biggest factor,” he said.
The federal coalition has not yet reached an official position on whether to cut the consumption tax, due to uncertainty about what level it should be to eliminate illegal trade.
Shadow treasurer Tim Wilson said there was a desire for action among his colleagues and that tax reform should be “at least part of the solution”.
“This is a government decision, we are not in the government,” he told ABC Radio Melbourne.
“Tax revenues from tobacco are rapidly decreasing… We are seeing a huge increase in illegal consumption.
“The problem is getting worse.”
Economists argue that successive governments’ decisions to increase tobacco tax have created a huge profit incentive for organized criminals to create a thriving black market.
Customs deputy minister Julian Hill acknowledged the “risk-reward equation” was higher in Australia than in other international markets.
But he argued there was no evidence that lowering the consumption tax would reduce the increase in illegal activity.
“There is no magic level of excise tax reduction that anyone can point to that will make a material difference to the problem,” Mr. Hill said.
“You could eliminate the tobacco tax and illegal products would still be cheaper.
“This material has produced an enormous global surplus for $1 or less per pack.”
The total amount of nicotine consumed in Australia increased by 40 per cent from 2017 to 2025, but the population increased by only 14 per cent in that period.
The figures paint a worrying picture of nicotine addiction, but Mr Hill said rising prices were the most effective way to reduce adult smoking rates for a generation.
“We don’t want to see smoking wards filled up and the next generation of Australians condemned to the scourge of premature death and disease caused by smoking,” he added.
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