New data points to major inflection point in the fight against illegal tobacco

Australia’s lucrative illicit tobacco market may finally be shrinking after years of rampant criminality including homicides and more than 300 firebombings that turned cigarette taxes into a frontline political issue.

New federal data suggests the black market has contracted by between 79 tonnes and 1400 tonnes over the past year. The drop points to the success of tighter border enforcement, alongside aggressive store closures in NSW and Queensland. Victoria has been a laggard, only beginning to close shops in September, long after other states.

Because the black market is difficult to measure, the estimate spans a wide range. It was developed by combining wastewater testing for combustible nicotine with the best available measure of household use, being Australian Institute of Health and Welfare data released earlier this year.

The illicit tobacco commission, which compiled the data, believes it shows the crackdown has yielded results.

“Just 12 months into scaled-up enforcement … the data is encouraging, including record seizures at the border,” assistant minister for customs Julian Hill said.

“As other states and territories follow South Australia and Queensland’s lead and dial up shop closures, we want to see a bigger impact on the illicit market.”

The Coalition and One Nation have been calling for drastic cuts in the tobacco excise to strip profits from criminal networks. NSW Labor Premier Chris Minns has also been calling to wind back taxes that have pushed legal cigarettes above $50 a pack, compared with the $10-$20 price for illegal ones.

But Labor has stuck to its view that narrowing the profit margin for criminals is not the right approach and would lead to higher smoking rates. Instead, it has put renewed effort into intercepting cargo at the border and pushing state governments to clamp down on dodgy tobacconists.

The scourge of illegal tobacco has caused particular damage in the streets of Melbourne, where an underworld gang controlled by the notorious Kaz Hamad orchestrated a wave of violence to control the booming market.

Federal data shows seizures of tobacco at the border are up 50 per cent on the same time last year. Interceptions of vapes have increased by nearly 20 per cent. Annual spending on illegal tobacco is estimated at $8.5 billion, more than on ecstasy, heroin, cannabis and cocaine combined.

Researchers from University of Sydney and Deakin University argued before the new data release that an enforcement-only response to the illicit market would fail in the same way as the war on drugs.

Public health lecturer Edward Jegasothy and associate professor in criminology James Martin used an article in The Conversation to say that “the world’s highest tobacco taxes” handed control of the market to criminals.

Data from the Australian Bureau of Statistics states illicit sources of tobacco grew from about 12 per cent to as high as 80 per cent as legal prices rose.

Gangs, the researchers argued, factored in the cost of seizures and arrests of lower-level criminals and easily replaced jailed operatives with a steady supply of willing mules.

“What the government has not yet done is examine highly regressive tobacco taxation and its rejection of reduced harm alternatives. It should evaluate whether they are fit for purpose, ethically or practically,” the researchers wrote.

“The division is … not partisan but jurisdictional, with the Commonwealth collecting the excise while the states are left with the mess.

“Until that happens, the response to each failure of prohibition will be more prohibition.”

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