POTTS POINT, New South Wales – A booming illegal tobacco trade is costing the Australian government billions, according to the first report on illegal tobacco released since the introduction of plain packaging last year. The report, issued this week, shows the problem has worsened with the tobacco black market now booming with illicit cigarettes imported mainly from Asia and the Middle East. 

The report was developed by KPMG LLP in the UK, and commissioned by British American Tobacco Australia (BATA), Philip Morris Limited and Imperial Tobacco Australia. It shows that the overall size of the market has grown from 11.8% to 13.3% and more than $1 billion (approximately $946 million in U.S. dollars) a year in excise revenue is being lost. The growth of the illegal market is consistent with evidence from covert purchases.

In BATA’s view, plain packaging, combined with our already high tobacco tax rates, and the previous government’s plan to increase tobacco excise by another 60% over the next four years, could see the illegal tobacco problem skyrocket. “Nearly 70% of every dollar sold from a legal pack of cigarettes goes to the government in taxes, which is why tobacco smuggling is such a lucrative venture for gangs as they obviously don’t pay any tax and pocket the profits instead,” said BATA spokesperson Scott McIntyre in a press release.

“You don’t need to be a crime expert to see that increasing the excise rate by 60% over the next few years will see gangsters profiting more than ever while smokers buying legal products are hit in the hip pocket,” he said. “Dishonest retailers are selling illegal branded cigarette packs imported from Asia and the Middle East, most without health warnings, freely and openly across Australia. … The excise system needs to be reviewed. But enforcement needs to be ramped up immediately.”

“The Australian Crime Commission think that organized crime groups view tobacco smuggling as low-risk and highly profitable, and that they also use the proceeds to fund other illegal activities. Obviously this needs to stop,” he said.