Australia's tobacco tax crushed smoking, but fueled a black market

Australia's long-standing strategy to curb smoking through steep tobacco taxes has achieved remarkable success in reducing daily smoking rates. However, this public health victory has inadvertently spawned a massive black market.

Mat Evans, a licensed tobacco store owner, now turns away customers seeking "the cheap stuff." He refuses to stock illegal cigarettes, fearing closure. For him and other legal vendors, the proliferation of cheaper illicit alternatives has decimated revenue. Nationally, this booming black market is not only fueling organized crime but also linked to increased nicotine consumption and a significant loss of tax revenue for the federal government.

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because it's illegal and I'll get shut down if I have it

A legal pack of 20 cigarettes in Australia costs between $40 and $50. In stark contrast, illegal options are readily available for $15 to $20. This price disparity has led to a dramatic shift in consumption. A decade ago, illegal cigarettes accounted for only about 10 percent of sales; today, that figure has surged to over 50 percent. When considering vapes and other nicotine products, the black market's share jumps to a staggering 80 percent.

This situation has prompted political calls for a tobacco tax cut. Both the Coalition and One Nation parties advocate for substantial reductions in the tobacco excise. One Nation proposes a 75 percent cut, which would bring the price of a pack down to around $21.20, making it competitive with illicit options. A recent parliamentary inquiry recommended freezing the excise tax at its current rate until the black market is "meaningfully eliminated." The government faces pressure to pause the next automatic tax increase, scheduled for Tuesday, as opposition parties consider formal policies for significant excise cuts.

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If we can sell the packets for under $20, most people are going to buy it from us