Shortcuts / 27 June 2024

The tobacco wars

I’ve heard smoking is an expensive habit these days…
It sure is. Australia is now one of the most expensive countries in the world to buy cigarettes. That’s because of a high tax put on them by the federal government in the past decade. The cost of an average packet of 25 cigarettes has risen to over $50 – and more than half of that price is tax.

Why are cigarettes taxed so heavily?
Well, there’s a good reason – it’s because the government wants people to stop smoking. Smoking-related diseases are a major cause of preventable diseases in Australia and they’ve put a huge burden on our health system.

Is it going to plan?
It seems to be working in that smoking rates have dropped. Thirty years ago, 1 in 4 Aussies used to smoke every day – that’s now down to fewer than one in 10. That’s good news, but the smokers that are left are increasingly turning to illegal cigarettes to save money. 

What do you mean by illegal cigarettes?
We’re talking about cigarettes that have been smuggled into the country. They haven’t had tax applied so they can be sold for a lot less than legal brands. So, just as an example, a packet of Winfield 25s costs around $50, whereas an illegal packet of a similar type goes for around $25. 

Who’s selling them?
They’re sold unofficially (what’s known as under-the-counter) by average corner stores or tobacconists. They’re usually foreign brands like Manchester, Marlboro or Double Happiness which are smuggled into the country, or sometimes they’re fakes made in places like China, South-East Asia or the Middle East. 

How are they getting into Australia?
Border Force officers say cases of illegal tobacco imports are through the roof. In 2018, they seized 400 million cigarettes – and last year that exploded to 1.7 billion. Reports say they’re being brought in by organised criminal gangs in packages ranging from small cartons to whole shipping containers.

That sounds like a lot…
It sure is. Experts reckon sales of illegal cigarettes now make up a third of the market in Australia. And that equates to a lot of money. This leads us to what you might have heard about in the news called the “tobacco wars” – which is the battle for control of that extremely lucrative black market. 

It rings a bell. What’s been happening?
A violent turf war has broken out between rival criminal gangs – and it’s been particularly bad in Victoria. Police there have linked a staggering 71 arson attacks – where stores, cafes and function centres have been firebombed – to tobacco gangs in just over a year. 

Are police onto it?
Yep. Police have arrested over 60 people so far – including kids as young as 12 who the gangs have allegedly paid to carry out armed robberies and light fires for them. It’s also happening in Western Australia and NSW, and police have destroyed millions of dollars worth of illegal tobacco crops being grown by crime rings in regional areas. 

Are the penalties enough of a deterrent?
Police and border force officers say no. That’s because the penalties for being caught importing illegal tobacco are a lot lighter than being caught importing harder drugs like cocaine or methamphetamine. 

What happens once illegal cigarettes get past the border?
They get distributed around the country, and the job of cracking down on illegal sales then falls to the police in each state. And officers say they simply don’t have the resources to monitor every shop selling cigarettes – particularly in Victoria, NSW and Queensland, where stores don’t need a licence to sell them.

How much tax revenue is the government (and us taxpayers) missing out on?
In the last financial year, the government forecast they’d generate around $15 billion in tax from tobacco products. The actual amount taken was $10.5 billion, so that’s a shortfall of $4.5 billion, much of which is now thought to be in the hands of criminals.

That must be costing businesses too…
Exactly. A couple of examples are petrol company Ampol, which reported a 19% fall in cigarette sales last financial year, and Fred Harrison, the CEO of Ritchies IGA stores, who said sales have dropped by 38%, which he says equates to around $100 million.

What do they want done about it?
Retailers are calling on the government to lower the tax on tobacco products so smokers wouldn’t need to find cheaper products. But health experts don’t want that – they’re encouraged by data that shows a drop in smoking rates from 11% in 2019 to 8.3% in 2023. 

What about vaping?
Good question. This is the new frontier, with vape usage rising to around 20% among young people aged 18-24yo – which is 4 times higher than in 2019. That’s a huge concern for the government and the health industry because that’s the generation they’re trying to stop from getting hooked on nicotine. And while vapes don’t contain tobacco, most do contain nicotine…

Is that why the new vape laws are coming in?
Yes, our federal parliament wants to restrict the sale of vapes to pharmacies. Under the proposed new laws, from 1 October, people aged over 18 will only be able to buy a vape from a pharmacy. They won’t need a prescription but anyone aged under 18 will.

What’s the reaction been like?
A lot of people reckon that’s great news – but health experts say removing the need for a prescription will open up sales of vapes to many more people. And the Pharmacy Guild of Australia isn’t happy either. It sees the move to turn them into vape retailers as “insulting”. Others are concerned that restricting the sale of vapes could drive them underground where they’ll become as lucrative for criminals as cigarettes… 

Sounds like it’s an ongoing issue…
It is. In the meantime, Victoria has announced new licensing laws that will require shops to have a licence to sell cigarettes by Christmas, so a lot of people will be watching to see if that makes a difference.

Squiz recommends:

Listening: A Life & Crimes with Andrew Rule podcast episode called The Tobacco Wars. Andrew brings years of crime reporting experience to this story and tells it in his engaging signature style.

Reading: An article published by the ABC called Fake Cigarettes, Firebombs and a Flourishing Black Market gives a detailed look into the numbers and the cost of illegal tobacco to the government and businesses.

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