Labor has floated the radical idea of shutting down tobacconists so that cigarettes are only sold in places like supermarkets as one way of curbing a flourishing tobacco black market, while revealing new laws to take on tobacco kingpins.
Assistant minister for customs Julian Hill is questioning the existence of small tobacconists where criminality and firebombings have taken off, although he closed the door on the faint prospect of cutting the tobacco excise to make legal cigarettes prices more competitive with illicit products.
“Health advocates are also doing interesting work … asking why our society continues to permit standalone tobacconists,” Hill will say in a speech in Canberra on Thursday.
“Australia now has around 40,000 tobacco retailers serving roughly 8 per cent of the population who smoke, compared with about 7000 petrol stations serving around 70 per cent of Australians who drive.
“That imbalance raises questions whether tobacco products should instead be sold only through mixed-use retail settings, subject to stricter licensing, oversight and compliance. Interesting questions for the future.”
In his expansive speech on tobacco control, Hill revealed the government will introduce tougher penalties and new laws that allow police to use wiretaps and rapidly seize the cars and houses of tobacco criminals, treating tobacco kingpins like drug lords in a national attempt to make illegal tobacco more risky and less profitable.
Hill will say that South Australia and Queensland have helped the legal tobacco trade by having officers target the black market and comprehensively patrol certain areas. Victoria, which has far fewer officials knocking on shop doors, has struggled to drive down criminal sales.
Revenue raised from tobacco sales, which at the turn of the decade was the federal budget’s fourth-largest source of income, has collapsed despite the per-cigarette rate of excise going up.
This financial year alone, tobacco excise – originally forecast to raise $14.2 billion in revenue – is expected to earn just $5.5 billion. By the end of the decade, the drop in legal smoking will have blown a $67 billion hole in the budget.
A combination of global tobacco oversupply and active criminal networks in the Middle East and Asia has fuelled criminal activity. More than 130 tobacco shops were firebombed in a Melbourne turf war over illegal cigarettes, while years of effort to wean the population off tobacco has been undermined.
Federal authorities seized 2.6 billion cigarettes in the last financial year, a tripling from four years ago, but the government has admitted it cannot solve the problem at the border and is overhauling federal law to make authorities more agile.
The government will, as soon as the next fortnight, revamp the customs, excise and tax administration acts to double and even triple penalties for crimes related to illicit tobacco to between five and 15 years’ imprisonment.
Bumping up penalties to such a level puts criminals pushing illegal cigarettes into the same class as the most serious criminals, enabling authorities to use the most sophisticated investigative techniques.
“Hitting criminals where it hurts means using every tool: more rapidly taking their profits, cars, cash, houses, boats and toys away. This will mean closely aligning Commonwealth frameworks … with other jurisdictions,” Hill will say.
“Al Capone got jailed for tax evasion, not his violent crimes.”
The massive evasion of excise has prompted calls from NSW Premier Chris Minns, some opposition MPs and tobacco-selling firms for the government to cut excise rates to bring legal packs of cigarettes, which can cost $50 or $60, closer to the price of black market packs, which can retail at about $15.
Analysis by Oxford Economics released earlier this year warned that without a reduction in excise, revenue from tobacco could fall to just $1.5 billion, with 90 per cent of all cigarettes likely to be bought on the black market.
It found reducing excise rates back to their 2019 level, which would cut the price of a pack of cigarettes by a third, would stabilise the legal cigarette market.
But a range of health groups and certain pieces of academic research make the point that even if legal cigarettes were made slightly cheaper, the price differential would remain too steep to change consumer behaviour.
Hill killed off muted speculation that Labor was considering cutting the excise, a prospect brought to life by a Senate estimates revelation that Treasury was modelling changes to the excise.
“As of now, based on the information available and advice to government, there is no reasonable level of excise reduction that would make any material difference to the ubiquitous illicit supply chains and distribution networks operated by organised crime,” Hill said.
“Giving up is not an option, nor is being distracted or seduced by misplaced hopes and false claims about excise reductions.
“What does success look like? Fewer shopfronts linked to illicit networks. An end to firebombings. Fewer violent incidents. A lower illicit share of the tobacco and vape market. Rising prices for illegal products. Stronger excise compliance. More proceeds-of-crime recoveries. And, most importantly, safer communities and a fairer operating environment for honest retailers and workers.”
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Paul Sakkal is chief political correspondent. He previously covered Victorian politics and has won Walkley and Quill awards. Reach him securely on Signal @paulsakkal.14Connect via X or email.
Shane Wright is a senior economics correspondent for The Age and The Sydney Morning Herald.Connect via X or email.