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Thousands of tobacco retailers appear to have shunned the state government’s new tobacco licensing scheme aimed at cracking down on the multibillion-dollar illicit cigarette trade.
Fewer than half of the state’s 8000 retailers have signed up to obtain a licence two weeks out from the start of the clampdown.
As many as 1300 shops around Victoria are estimated to sell illicit tobacco products and vapes, and police, industry and underworld sources believe hundreds are directly controlled and operated by the Hamad cartel – the most powerful organised crime group in the tobacco black market.
Tobacco Licensing Victoria has received about 3300 licence applications from tobacconists and wholesalers since the scheme launched in July – about 40 per cent of the estimated number of tobacco outlets.
Casino, Gaming and Liquor Regulation Minister Enver Erdogan has renewed calls for retailers to sign up. Enforcement of the $46 million scheme begins on February 1, nearly two years since the crackdown legislation was first mooted, and more than a year since it passed parliament.
“As the deadline approaches, we’re urging every legitimate business that sells legal tobacco to apply now, so we can continue our strong crackdown on illegal tobacco and the criminal activity that sits behind it,” Erdogan said on Thursday.
Businesses will need to lodge their applications before the end of January to be able to continue trading after February 1. The rules apply to any business selling tobacco products, including tobacconists, supermarkets, convenience stores, bottle shops, petrol stations and online retailers.
Businesses that apply before the start of February will be able to continue trading while their application is being assessed. However, those that apply on or after February 1 will have to pause tobacco sales until they are granted a licence.
The state government is expecting the number of businesses applying for a licence to increase closer to the deadline, following a rise in applications over the past two weeks. Some major tobacco retailers are yet to sign up.
The looming crackdown does not appear to have altered illicit cigarette prices in metropolitan Melbourne, with Manchester packets holding steady at $12 to $25 depending on the location of the shop.
Underworld kingpin Kazem “Kaz” Hamad launched Melbourne’s so-called tobacco war in early 2023, after attempts to form a “commission” to control the market among major crime players failed.
Hamad, who ran operations from the Middle East, was arrested in his native Iraq last week, raising questions about the future of the market.
Victoria Police has confirmed it will not provide security or escort services for the 14 state-appointed tobacco inspectors on their rounds unless there is credible intelligence of a safety threat.
Under the state government scheme, any person found by inspectors to be selling illicit products faces a fine of up to $366,318 or up to 15 years’ jail, while the fines are $1.8 million for businesses or incorporated associations running a shop. Those selling tobacco without a licence could be fined up to $170,948 or face five years in jail, while businesses could face fines of more than $854,000.
Tobacco Licensing Victoria will also be able to suspend and cancel licences, seize illicit tobacco and launch court proceedings. The regulator will also be able to knock back a licence if the holder does not pass a “fit and proper people” test.
A Victoria Police spokesperson confirmed that officers would not be used for escort duty for inspectors.
“Victoria Police will continue to focus on serious and organised crime offences linked to the illicit tobacco trade, including arson, extortion, firearms-related violence and money laundering,” the spokesperson said.
“Victoria Police will support where and as required the newly established Tobacco Licensing Victoria, which is responsible for ensuring the lawful supply of tobacco in Victoria including enforcement and compliance activities in the retail and wholesale environment.”
The Tobacco Licensing Victoria inspectors do not have the power to shut shops.
An underworld source with knowledge of the illegal market said it was a much different approach to that taken by authorities in Queensland, where the ability to close shops had led to a massive disruption in the illicit market.
“It’s really working in Queensland. It makes no sense [in Victoria]. If you were selling drugs out of a shop, what would they do? Shut it down. Why is tobacco different? But it means things are going to go on a lot longer here,” the source said.
As revealed by The Age last week, criminal syndicates running the lucrative black market have already hatched plans to avoid the crackdown, including by selling black market cigarettes through business fronts such as laundromats, hairdressers and anonymous depots.
Another possible solution being floated is shifting production to counterfeiting hubs in countries such as Cambodia, where illicit tobacco could be inserted into fake packages that appear to meet Australia’s packaging standards and then smuggled into the country to be mixed in with the legitimate supply.
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