Sarah Basford Canales 

Experts weigh in on how to tackle illicit tobacco – and why an 80% excise cut is not on their list

Tougher enforcement and better monitoring products coming into Australia should be considered before lowering taxes, experts say
  
  

A man holds a cigarette
Health experts warn that a Coalition proposal to slash excise would wind back Australia’s success in bringing down smoking rates. Photograph: Jakub Porzycki/NurPhoto/Shutterstock

The Coalition’s health spokesperson has been unable to detail how its proposed slashing of the tobacco excise would reduce smoking rates, as experts say tougher enforcement should be the main focus for governments.

The shadow health minister, Anne Ruston, on Friday said that cutting the excise by 80% and funding an additional $200m on a law enforcement push would take back market control from organised crime.

“We are hoping that the combined package of what we’re proposing here, not just the dropping of the excise, but the regulation of the market and making it certainly more difficult for children to access these products,” Ruston told the ABC’s Radio National.

“In the enforcement surge and the anti-smoking and anti-vaping campaigns, we are hoping to put downward pressure on smoking rates.”

But health experts have warned the proposal – similar to that used in Canada in the 1990s – is misguided, and will wind back Australia’s success in bringing down smoking rates.

Instead, they have called on governments to focus on enforcement, including by tracking cigarette imports to ensure products aren’t diverted to the black market and by tough crack downs on illicit tobacco retailers that operate throughout Australia.

Prof Becky Freeman, a University of Sydney tobacco control expert, said the first port of call was enforcing existing laws to curb tobacco supply and targeting criminal supply chains.

“There’s no point in having laws if we don’t enforce them,” she said.

“Illicit tobacco markets are actually shaped by supply chains, enforcement capacity, organised crime opportunity, how the industry behaves, retail controls, border dynamics, and, of course, the political pressures.

“[Cigarettes are] really an inexpensive commodity to make. So, what would happen in response if this 80% tax cut went through? Illicit prices would get lower as well.

“If you don’t actually dismantle those illicit supply networks, you are not going to be able to beat them on price.”

Freeman said the government could also reduce the number of legal tobacco retailers. There are an estimated 40,000 retailers around Australia.

Dr Cheneal Puljevic, a health expert at the University of Queensland researching illicit markets, said reducing tobacco demand by highlighting smoking harms was another important move.

“It’s been decades since we’ve had a strong public health campaign,” she said.

“We should be using the excise to make nicotine replacement therapy free, and basically throwing everything we can at promoting smoking cessation and helping people to quit smoking.”

Puljevic said there were effective methods for monitoring the supply of tobacco coming into the country, such as international track and trace systems that allow authorities to check when and where shipments exit supply chains.

“There’s just a million things that we could be trying first before we do something as drastic as lowering taxes,” she said.

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The independent economist Chris Richardson backs a temporary reduction to the excise and an increase in enforcement to prevent billions of dollars in profits flowing to organised crime. But he agreed it was time for Australia to face the music and tackle the black market head on.

“We need shock and awe for the legal product. You know, the combination of its price going down due to a tax change, and the effective cost of business of organised crime going up as a result of better enforcement,” he said.

“You don’t have to have really low taxes on tobacco forever, but you have to have them as a circuit breaker until we can get the rule of law back in this market.”

Illicit tobacco accounted for 80% of the cigarettes smoked by Australians in 2025, with untaxed packets costing as little as $10 compared with more than $40 for a legal packet.

With increased profits from illegal tobacco sales going to organised crime groups that have pounced on the market imbalance, the Coalition and One Nation have called for the federal government to drastically reduce the excise it collects.

The federal government raises nearly $30 per legal packet of cigarettes sold in Australia, accounting for about 75% of the cost.

Federal excise revenue peaked at $16.3bn in 2019-20 but was expected to generate only $5.5bn last financial year, and $4.8bn this year.

Angus Taylor unveiled the opposition’s policy on Thursday, pledging to reduce it by 80% from its current rate of around $30 a to about $6. The opposition leader said this would end the black market’s dominance and pull the market back under regulation.

The Liberals have also said they would legalise and regulate vapes and nicotine pouches, and would spend $200m on a law enforcement push against illicit sales, with increased funding for the Australian Border Force, federal police and other agencies.

Freeman said research had shown the high cost of cigarettes was one of the most effective deterrents to smoking.

“Making cigarettes cheap everywhere to everyone in every single shop all across the country will take away that price pressure.”

 

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