The shortfall could have been larger.
In last year’s budget,Treasurer Jim Chalmers revealed plans to increase tobacco excise by 5 per cent a year for three years on top of ordinary indexation in a move expected to “encourage smokers to quit”. The change would also deliver the budget an extra $3.3 billion by 2026-27 including an additional $320 million in 2023-24.
According to James Martin,a senior lecturer in criminology at Deakin University,the ever-increasing excise has just forced a growing number of smokers to seek out illicit tobacco.
With cigarettes now costing at least $50 a pack,a heavy smoker faces an annual tobacco bill of $18,000 to maintain their habit. But with the black market offering cigarettes at just a fraction of the cost,many Australians are simply seeking out retailers willing to offer illicit goods.
“You can’t just keep pouring fuel on this fire that leads straight to the black market,” he said.
The Australian Taxation Office estimates that despite a fall in the total tobacco market and growing seizures of illicit material,the amount of illegal tobacco is growing and now makes up at least 15 per cent of the national market.
Martin said while governments talked up their ability to stop illegal cigarettes and vapes from entering the country,black marketers were simply increasing the amount they tried to bring into Australia.
He said because there was now an overwhelming financial incentive for people to source their cigarettes from an illegal source,the government had to look at cutting tobacco excise while also ramping up surveillance of retail outlets.
“I think what they need to do is cut taxes on cigarettes,bring vapes into the legal market and go with significant law enforcement,” he said.
The Nationals have argued that vapes should be taxed the same as cigarettes and have heavy restrictions on their sale,with the extra revenue funnelled into regional health,education and housing.
Loading
But the government has ruled that option out. Health Minister Mark Butler has cited evidence from New York where despite vapes being brought into the tax system,little revenue had been raised while vaping rates have increased.
Sydney University senior lecturer in public health,Ed Jegasothy,said tobacco had been one of the first items to be taxed by governments in Australia,but the rationale to reduce smoking rates only emerged in the early 1990s.
He said large increases in tobacco excise had been introduced by every government since 2010 in the name of reducing smoking rates. However,the policies had not been shown to be effective.
In reality,tax increases had boosted the budget bottom line,with unknown health impacts.
The latest tobacco excise figures,alongside the surge in black market activity,proved the current situation was untenable.
“It’s distasteful and it’s politically difficult,but there needs to be serious consideration of whether tobacco policy should go in a different direction,and whether taxes should be cut,” he said.
Cut through the noise of federal politics with news,views and expert analysis.Subscribers can sign up to our weekly Inside Politics newsletter.