Illicit tobacco is 'out in the open' but what is the best way to deal with it?

Australia Broadcast Center

a day ago

Jon Jon Jensen says tobacconists selling black market cigarettes are easy to find.
The 58-year-old from country Victoria has been smoking for about 45 years and turned to under-the-counter cigarettes six years ago.
"I just found they are so readily available, I can get them almost anywhere," says.
He is one of the many Australians buying illicit tobacco — a trade that has been expanding over recent years.
In 2023, it was estimated that illegal tobacco consumption may account for close to 30 per cent of the total tobacco market in Australia, although these estimates by the legal tobacco industry are disputed.
And despite sectors of government agreeing Australia has a problem with the illegal trade, there's mixed messaging about how to tackle the problem.
Unlike a pack of legal cigarettes, which costs about $40 for 20, Mr Jensen buys a box of 100 cigarettes once a week, which he says costs him $30.
"Everyone I know who smokes is buying illicit tobacco, because of the price," he says.
The difference in price between the products is because of the tax excise that is added to legal cigarettes, which can be up to 70 per cent of the total retail price.
University of Sydney public health professor Becky Freeman says, despite having some of the lowest smoking rates our country has seen, we are seeing illegal tobacconists "popping up everywhere" because "cigarettes are so incredibly profitable".
The current revenue for the government from tobacco excise sits at about $7.4 billion — a drop from $12.6 billion in 2022-2023 and $16.3 billion in 2019-2020.
During a press conference last month, federal Treasurer Jim Chalmers said there were two reasons for the decline.
"The good reason is fewer people smoking, the bad reason is we know that we've got a challenge when it comes to illegal tobacco," he says.
While he has ruled out lowering the tax excise on cigarettes, which will rise again in September, NSW Premier Chris Minns has a different view.
"[The cost is] pushing regular law-abiding citizens into an illicit black market, where they are forced to buy cigarettes for $20 or $17, compared to $60 or $80," he said during Parliament in June.
He also argued the government did not have enough resources to crack down on the illicit trade as it currently stands.
"At the end of the day, we have to make a decision about what the best use of police resources are or health resources are," he said.
Professor Freeman worries if the government was to lower the tobacco excise, it would be sending the wrong message.
"The only thing you would be doing is rewarding the very retailers who had flouted the law by allowing them to legally sell cheap cigarettes," she says.
She argues that, if the government was to lower the tax excise, it would essentially have to remove it altogether to "compete with the illicit market".
"My concern with getting rid of the tobacco tax essentially is we would make smoking more appealing to more people and we'd be undermining all the public health gains we have made," she says.
There are more effective ways Ms Freeman says the government can use to target the illegal trade.
"If we really want to tackle the illicit market, to me it's about managing the supply of products … cigarettes are sold everywhere in any kind of retailer you can imagine.
"If you want to be able to enforce illicit tobacco, the number one thing you should be doing is reducing the number of outlets that sell it."
But Fei Gao from the University of Sydney Business School believes that while a range of steps are necessary to tackle the black market, one of them is lowering the excise.
"When something is so expensive from the legal market, the illicit market will grow," Dr Gao says.
She says lowering the excise is an "important step because if that gap can't be closed, any effort the government takes or makes will be wasted".
But she says determining the amount will require collaboration.
"During all these years, we haven't done any policy review on tobacco excise, so I think we need to gather a bunch of experts, such as tax experts [and] economists," she says.
"We need to sit together, talk about this topic and we need to price in all relevant factors such as the growing illicit tobacco market, the replacements such as vapes [and] the ever-changing smoking rate."
This month, NSW and Victoria were the last two states to introduce tobacco licensing laws, which mean businesses in NSW have until the start of October to apply for a licence that allows them to sell cigarettes.
For Victoria, it's February next year.
But Professor Freeman says legislation has to go further.
"Immediately shut down shops that you find selling, to issue massive fines not only to the business owner but to the landlord who owns that property and leases out that building," she says.
"And then finally you should be using this licensing scheme to reduce the number of outlets."
Mr Jensen says he went from smoking up to 90 cigarettes a day, down to less than 20.
He wants to quit, but says the nicotine replacements are "too expensive".
"I just wish the excise they do collect on cigarettes would be subsidising nicotine replacement therapy because this nicotine replacement therapy is expensive.
"I don't particularly want to give up nicotine, I'd love to give up the cigarettes, but I can't afford the nicotine replacement therapy that goes with it."
Mr Jensen says a box of 20 inhalers costs about $40.
He says his cheapest option is turning to the black market.
Federal Health Minister Mark Butler didn't answer questions from the ABC about whether he'd consider subsidising the cost of nicotine replacement therapy.
The Albanese government introduced the Illicit Tobacco and E-Cigarette Commissioner (ITEC) role on July 1, 2024 to "coordinate national efforts to combat the threat of illicit tobacco and e-cigarettes to the Australian community".
In a statement to the ABC, the ITEC said: 'Criminal networks don't stop at borders, and neither should the response. The ITEC continues to work with all levels of government to coordinate national policies, and support enforcement efforts across jurisdictions to drive these illicit actors out of business."
As for Mr Jensen, he says he'll continue to smoke illicit tobacco until the price of inhalers drops.
"If they're serious about getting us to quit smoking, make quit-smoking products cheaper."