Australia’s Tobacco Tax Backfires: $10B Black Market Booms
Australia’s aggressive strategy of hiking tobacco taxes to curb smoking is facing intense scrutiny as evidence mounts that the policy has backfired, fueling a massive $10 billion illicit tobacco market run by violent criminal gangs. While higher prices initially deterred smokers, critics argue the strategy has been pushed too far, creating a distorted market where illegal cigarettes are so cheap and accessible that overall smoking rates may actually be increasing.
The price disparity is stark: a legal pack of 20 cigarettes can cost upwards of $50, while an illegal pack sells for around $13. This gap has emboldened organized crime, leading to a wave of violence including firebombings of tobacco shops and thefts. NSW Premier Chris Minns has expressed frustration, claiming that “smoking has genuinely returned to 1991 levels” due to the availability of cheap illicit tobacco. Even NSW Health Minister Ryan Park has called for federal intervention, stating, “We do need help from the federal government in relation to lowering the excise because that has created essentially a distorted market.”
Professor Sinclair Davidson, in a new Centre for Independent Studies research paper titled ‘Taxing Tobacco Into Illegality,’ traces the issue back to a 25% excise hike in 2010, followed by successive annual increases. Since 2010, the excise has jumped 470%, driving a 330% rise in the price of a pack of Winfield Blues. While this initially reduced official smoking rates and boosted revenue, federal excise collection has fallen sharply since 2019-20 as the black market seized market share.
Davidson argues the policy failure stems from a mismatch in roles: the federal government collects the tax, but states are left to police the resulting criminal activity. Nicotine traces in wastewater and consumer surveys now suggest that overall nicotine consumption, including through vapes, has stopped falling or is rising. Federal Health Minister Mark Butler cautions that slashing excise to compete with illegal prices would need to be drastic. The situation draws parallels to Canada in the early 1990s, where the government was forced to reverse sharp tax increases to combat smuggling.
- Read more: Australian Cartel & Chinese Gang Control Illegal Vape Market
- Reference: Black market lit up by backfiring ciggies tax
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