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A Liberal MP says excise on tobacco should be slashed back to where it was almost a decade ago, warning more innocent people will be hurt by organised criminals fighting to supply the illicit cigarette trade unless the current tax system is overhauled.
As the NSW government accused the federal government of contributing to the explosion in illicit tobacco by failing to prevent imports of illegal products, Mary Aldred said it was clear that years of higher excise rates were driving a social crisis that was doing severe damage to the federal budget.
This masthead reported on Monday new research by Oxford Economics, commissioned by one of the nation’s largest independent retailers, that backed a 30 per cent cut in excise as part of a broad suite of measures aimed at undermining the illegal tobacco trade.
The federal budget is facing a $67 billion shortfall in tobacco excise in the decade up to 2028-29 despite a steep rise in tax rates, with smokers moving to illicit products. Illegal cigarettes can be less than a third of the price of a legal product.
Aldred, whose electorate east of Melbourne has suffered cases of criminals selling illicit tobacco or trying to pressure legal sellers, said apart from cutting excise levels back to their 2017 level, the entire illegal tobacco issue should go to national cabinet for a co-ordinated approach.
A national taskforce headed by the Australian Federal Police should oversee a targeted policing response to the wave of criminal activity.
She said some of the country’s most notorious organised criminals were overseeing firebombings and ram raids that had cost the life of at least one person, Victorian woman Katie Tangey.
Aldred told his masthead: “I’m really worried we’re going to see more people hurt if we don’t do something different.
“The federal government is getting less revenue, more people are smoking and we’ve had the biggest increase in organised crime that we’ve seen in decades. Something has to change.”
Oxford Economics found that without a change to the tax structure and more stringent policing at the border and across retail outlets, 90 per cent of all cigarettes bought in Australia by the end of the decade would be illegal.
It found a deep cut in excise would be enough to encourage smokers to return to legal cigarettes.
The NSW government has previously backed a cut in tobacco excise.
NSW Health Minister Ryan Park said he would be receptive to “any policy measure” that reduced the use of tobacco, noting much of the illegal product was being imported.
“This public health failure has seen states and territories have to dedicate further resources in licensing, enforcement and in dealing with the healthcare challenges that result from it,” he said.
“In addition to the demand created by the excise, I am concerned about the influx of these products through our borders, and clearly there’s more to be done in that regard.”
New federal Liberal leader Angus Taylor noted the Coalition had gone to the last election promising to decriminalise vaping, arguing the current policy system was failing.
“I think we’ve got to be sensible about this and realise there’s a big problem, and the current way it’s being managed is not working,” he told The Kyle and Jackie O Show.
In his last budget, Treasurer Jim Chalmers unveiled a two-year, $150 million package targeted at the illicit tobacco trade. In the same budget, he revealed a near $17 billion downgrade in expected tobacco excise collections.
Prime Minister Anthony Albanese would not be drawn on whether the government would freeze or cut tobacco excise, saying it was an issue that would be dealt with in the budget.
But he signalled a further clampdown on the illegal trade was an option.
“There are two reasons why [the tobacco excise] was put in place. It’s not just about revenue,” he told ABC radio on Tuesday.
“It’s also about sending a message on health. And when it comes to illegal tobacco, we’re spending a lot of money as well. A lot of those taxes are going into clamping down on illegal tobacco and those criminals associated with it.”
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Shane Wright is a senior economics correspondent for The Age and The Sydney Morning Herald.Connect via X or email.From our partners
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