The Rise of Black Market Tobacco

The recent discovery of a $12 million crop of illegal tobacco in bushland just south of Canberra, has law enforcement extremely worried. And so it should.  Anyone who knows anything about black markets knows that where there’s smoke there’s generally a raging bushfire not far away.

KPMG’s Illicit Tobacco in Australia 2016 report showed that we are now losing $1.61 billion in taxes through illegal tobacco. On top of the $1.18 billion the taxpayer spends on the futile war on other illicit drugs, we are now spending an equally futile $7.7 million on trying to police illegal tobacco. It’s a total waste of time and money.

However not everyone agrees on this. Quit Victoria and the Cancer Council Victoria drew up a report on the use of illegal tobacco back in 2011 which they say supports the notion that only 2-3 % of the tobacco smoked in Australia is black market. British American Tobacco commissioned Delloite’s to do their own survey in 2011 and they came up with a figure of 15.9%. In May of this year KPMG’s report said 13.9% of tobacco consumption in Australia was black market. The Cancer Council strongly disputed the Deloitte’s figure and no doubt would do the same for the KPMG figure. They site figures from the Australian Government's National Drug Strategy Household Survey from 2001 to 2010. They claim these figures show that only .3% of tobacco smokers use black market products – notwithstanding the fact that the cost of tobacco skyrocketed in 2010, following large increases in excise and customs duty. Even more ridiculous is the Council’s claim that, ‘The National Drug Strategy Household Survey shows definitively that the vast majority of smokers who have ever used illicit tobacco no longer use it, and—of those who do still use it—most used it only occasionally’.

So why would tobacco users who have been used to paying around $15 for 100g of illegal tobacco, suddenly ditch it and start paying the recommended retail price for the equivalent legal product, of about $38? Are they saying that the chop chop dealers just packed up their bags and went home? Or are they saying that suddenly all the people buying illegal smokes decided that they better do the right thing by the government and pay all the taxes and levies on legal smokes? It just doesn’t make sense.

The huge price rises in tobacco over the past decade and the amount of public education on smoking has caused a lot of people to stop - no doubt about that. Smoking commercial tobacco, which is so laden with chemicals, preservatives, flavour enhancers and other substances that keep you coming back for more, is about the worst thing you can do for your health. However when it comes to the health of society, things get a little more complicated. Despite what the Cancer Council says, increasing government regulation on tobacco is causing us to draw near to a tipping point where we are about to send potentially millions of smokers into the abyss of the black market just so they can afford to feed their habits.

There’s good reason to question the Cancer Council’s views on lots of things to do with tobacco because they live in an academic world where the realities of the market place do not seem to affect them. Coles is probably their largest sponsor, having raised in excess of $10 million for the Council through their Daffodil Day appeal. But Coles is also arguably the nation’s largest retailer of legal tobacco. No one is impugning anything illegal or underhanded in this relationship but the Cancer Council never declares this part of their relationship with the big retailer. Many people see a huge conflict of interest here.

The situation is so bad that tobacco retailers and distributors are now suffering record thefts and assaults as criminals realise that stealing tobacco is worth more than selling drugs. They don’t even go for the till anymore in these shops. With 100 packets of cigarettes worth $2,500 these days, why would you waste time stealing cash?

With the federal government set to impose another four tobacco tax increases in the near future, the price of tobacco will be completely out of reach for many tobacco addicts. The government and the Cancer Council think this is a good thing and will make even more people quit. No doubt another half a percent might. But for the other 12% of Australians who still smoke there could be a mass exodus to the black market. From there it is not out of the question that a developing black market in tobacco could soon join up with the black market in illicit drugs to form a super black market worth many billions of dollars. If only a small portion of this goes to terrorist organisations, or to strengthening already existing crime gangs the nation is in serious trouble.

Australian governments and their health agencies need to allow tobacco addicts to buy their products at high but affordable prices. They need to get tobacco out of Coles and Woolies and into age-restricted premises where children cannot see tobacco transactions being made. And as a society we need to come up with ever more creative educational campaigns about the about the dangers of smoking.

– Fiona Patten MP, Op-Ed piece