Rising tobacco taxes make an ash of us all

Imagine the scene: Border Force officers raid a warehouse, looking for smuggled drugs. They crack open crates only to find them filled with cigarettes. The uniformed officers shake their heads in disappointment.

But then the Border Force boss, looking like Eliot Ness in the film ‘The Untouchables’, says “Chin up boys, this is illegal tobacco. This raid is a success.”

When it comes to nicotine and tobacco, Australia loves prohibition.

Growing tobacco in Australia has been illegal since 2006. You need a licence to grow it and no licences have been issued. Importing tobacco into Australia is also illegal, unless you are willing to pay $900 per kilogram in tobacco excise and more than $100 of GST, on a product whose actual cost is only around $140 a kilogram. And selling e‑cigarettes that contain nicotine is similarly illegal.

Enter organised crime.

Tobacco smuggling is now a key part of its business model. The Al Capone’s of Australia no longer rely exclusively on the markets for drugs and illegal firearms. Replacing legal tobacco products with cheaper illicit products is not only hugely profitable but the risks are less — the penalties are lower as is the potential to get caught. It also offers opportunities to better fund their firearms and drugs smuggling activities, or anything else they like.
Thanks to the Government, there’s never been a more exciting time to be a crim.

The Treasury and Tax Office rake in $12 billion of tobacco excise plus more than a $1 billion of GST each year. Avoiding these taxes, which the Government lifted by a massive 17 per cent on 1 September this year, is what makes smuggling so lucrative.

Then there’s the Health Department, the Nancy Reagan of Australia’s bureaucracy. Their ‘just say no’ attitude underpins the ban on e-cigarettes, while their obsession with screwing tobacco companies underpins their love of plain packaging, which makes illegal cigarette packs more attractive than the legal ones.

There’s also Border Force, which brags about each interception of smuggled tobacco but stays quiet on the tsunami of smuggled tobacco that gets past them. The money to be made from smuggling tobacco has become so obvious that two Border Force officials were recently arrested for alleged involvement in a tobacco smuggling ring.

There’s the police, which, when confronted by retailing of smuggled tobacco in broad daylight, say it’s a matter for the local council.

And there are local councils, which say it’s a matter for the police.

No one in Government will take responsibility for creating Australia’s biggest and fastest growing black market, which undermines legitimate tobacco retailers, attracts violent thugs and finances organised criminals.

It is a sad irony that, where extortionate tobacco taxes were supposed to save lives, they are now endangering us all.

Around 14 per cent of all tobacco sales in Australia are of illegal products. Given this huge demand, and with buck passing within government, tobacco smuggling has become a growing industry generating huge returns. If you want to own your own house in Sydney or Melbourne, it might be an option worth considering.

Originally published in the Daily Telegraph on 1st September, 2017

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