Cutting cigarette tax will not create more smokers, Angus Taylor says

Australia’s opposition says it could cut more than A$20 from the tax on a pack of cigarettes without creating more smokers, arguing that illegal cigarettes already sell for roughly that price.

Opposition Leader Angus Taylor and Shadow Home Affairs Minister Jonno Duniam are defending a proposed 80 percent cut to the tobacco excise. Duniam told ABC’s Insiders that the Coalition had not modelled the effect on smoking rates, but had examined the consequences of similar policies overseas.

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There was a point in time they went up, but over the course of time, as the illicit tobacco trade trailed off, smoking rates went down to where they are now, which is 11 per cent.

Canada’s experience sits at the center of the debate. The country raised tobacco taxes during the 1980s and 1990s to discourage smoking, then federal and provincial governments cut them in 1994 after organised crime expanded. Duniam said smoking increased, particularly among young people, before ultimately falling to 11 percent as the illicit tobacco trade declined. Canada later restored its previous tax rates, which supporters say enabled a gradual return after the black market had been weakened and law enforcement established.

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We should also focus on disrupting the capacity for the illicit market to provide these products. That also causes issues for their capacity to supply, impacts their capacity to offer cheaper prices and the combined package altogether, not just the cut in excise, is what we believe will cripple the illicit tobacco market.

Critics argue the Canadian approach did not permanently solve the problem. They point to the return of the illicit market, higher youth smoking rates in the meantime and lost tax revenue. Australia’s tobacco commissioner estimates that about half of tobacco sales now take place through the black market, generating billions for crime groups, contributing to violence in Sydney and Melbourne and reducing federal revenue.

Duniam said a tax cut would need to accompany enforcement and education. He argued that bringing legal cigarettes closer to the price of illegal tobacco, while disrupting criminal suppliers, could reduce the illicit market. Taylor separately said legal cigarettes needed to reach “parity” with illegal tobacco to help smash organised crime.

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We want to see the smoking rates in this country go down. In order to do that, a part of the problem is dealing with cheap smokes out there in the community now. Kick off the illegal trade is the only way you can do that.