Illegal Tobacco Costs Australia $3.3B in Lost Tax: ACIC

Australia’s illegal tobacco market cost the federal government an estimated $3.3 billion in avoided excise tax revenue in the 2023-24 financial year, according to a new report from the Australian Criminal Intelligence Commission (ACIC). The national criminal intelligence agency warns that organized crime’s control over this lucrative black market is continuing to grow, fueled by consumers seeking cheaper alternatives to heavily taxed legal cigarettes.

The Australian Taxation Office believes the illicit trade now accounts for one in every five tobacco sales. This has led to declining tax revenues despite the government’s excise on legal cigarettes reaching almost $30 for a pack of 20 sticks in September, an almost eightfold increase since 2006. The ACIC’s analysis determined the total economic impact of illegal tobacco, including $700 million in related healthcare costs and reduced productivity, amounted to $4 billion over the 12-month period.

The report also highlighted the escalating violence of the so-called “tobacco wars,” with at least three people killed and over 200 firebombings linked to rival gangs competing for black market profits since 2023. The Australian Institute of Criminology noted that the $4 billion estimate was “almost certainly an underestimate,” as it does not include the “substantial and rapidly expanding market” for illegal e-cigarettes and vapes, which has grown since retail stores were banned from selling them.

The findings have intensified the debate over Australia’s tobacco excise policy. New South Wales Premier Chris Minns has called for a federal review, arguing that high taxes on legal cigarettes are the “leading reason” for the boom in the illicit market. “A legal packet of 20 cigarettes costs $50 bucks… and you can pick up an illegal packet of cigarettes for $13,” he told ABC Radio Sydney. Federal government revenue from tobacco excise is forecast to be $7.1 billion next financial year, less than half of the $16.3 billion collected in 2011-12. However, Federal Treasurer Jim Chalmers has so far rejected calls for a review, stating he did not think the answer was “to make cigarettes cheaper for people.”

• Reference: Illegal tobacco burns $3.3bn hole in Australia’s tax revenue, crime agency says

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