Australia has one of the highest tobacco taxes in the world, and it has been the cornerstone efforts to drive down smoking rates. But experts now say the excise is so high it is fuelling a black market. Many tobacconists across the country have been found to sell under-the-counter cigarettes, robbing legitimate retailers and taxpayers of billions of dollars.
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00:00I reckon it probably would have been about 12 months ago when the pop-up shop started.
00:10It is so lucrative and the margins are so big, it is really frustrating.
00:19Something doesn't add up around here.
00:22There's smoke, but business isn't exactly firing for Matt Evans.
00:26I'm the only one that actually supplies really.
00:29No one else does it anymore.
00:33Matt's now the only wholesaler supplying cigarettes to servos and stores across the Bega region
00:38on the New South Wales South Coast.
00:40But as more tobacconists have popped up, his business has been drying up.
00:45There's now businesses that used to order every single week.
00:49Some of them are ordering every second week, every third week.
00:52It's just not worth it, they can't compete with illegal tobacco in town.
00:57Here in Cobargo, Dave Allen is holding on.
01:01His hotel sells cigarettes legally.
01:03In the last 12 months we've gone down by about 30%.
01:06What's changed is a black market that he says is operating in plain sight.
01:12In Bega, a town of about 5,000, cigarettes have long been sold at supermarkets, petrol
01:17stations and a single tobacconist.
01:20But recently, another three have opened.
01:23And it appears to be a state-wide trend.
01:26The number of shops selling tobacco in New South Wales has exploded from 14,500 to 19,500
01:34in the space of four years.
01:36Unlike other states, stores here don't need a licence to sell cigarettes.
01:41They just need to register with the health department.
01:44Health officials were here only a week ago conducting inspections and while they won't
01:49confirm the details, locals say about 10 stores on the South Coast were caught selling under
01:55the counter cigarettes.
01:57The tobacco was seized and in most cases, the owners were issued with on-the-spot fines
02:02of $1,100, which legitimate retailers say is so low, it's hardly a deterrent.
02:09If people get breached, they lose the counterfeit stock or the illegal stock, they pay the small
02:15fine if they get the fine and continue on.
02:18So to me, that says a lot.
02:23James Martin is a Deakin University criminologist.
02:26Overwhelmingly, the thing that's fueling the black market is excessively high cigarette
02:31taxes, tobacco taxes.
02:33To help drive down smoking rates, the tobacco excise has been increased aggressively.
02:39It's now worth about $1.30 per cigarette stick, pushing the price of a packet of 25 to over $50.
02:47Black market cigarettes sell for half that price and they're being illegally imported
02:52in vast quantities.
02:54In 2018, 400 million cigarette sticks were seized at the border.
02:59Last year, it was $1.7 billion.
03:03When we're seeing smoking rates flatlining in this country, when we're seeing the increase
03:07in the black market, these are signs that the policy isn't working.
03:12As the black market grows, it's also punching a multi-billion dollar hole in the federal
03:17budget with revenue consistently falling well short of Treasury forecasts.
03:23It is not being driven predominantly by people quitting smoking, but rather by people switching
03:27to the black market.
03:28I think the tobacco tax excises are well past their point of effectiveness.
03:33Victoria is at the epicentre of the tobacco wars.
03:37The tobacco store is engulfed in flames just metres from homes and apartments.
03:41Rival gangs vying for control of the lucrative market have firebombed dozens of stores.
03:48The state government can't tell the ABC how many tobacconists are operating there, but
03:53it has vowed to introduce a licensing regime by year's end.
03:57Most popular 20s is definitely these ones.
04:00It's a move Matt Evans hopes New South Wales will follow.
04:03I'm getting screwed over because I'm doing the right thing.
04:07Instead, he's watching as his profits go up in smoke.
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