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ILLICIT TOBACCO ON THE RISE AS RETAILERS FACE ON-THE-SPOT FINES

Retailers caught selling cheap ciggies could be hit with on-the-spot fines as new figures show seizures of illicit tobacco have soared. It comes as the federal government considers establishing a task force to deal with the issue. SEARCH THE SUBURBS

Ava Benny-Morrison, Crime Reporter, The Sunday Telegraph

May 24, 2020

Sky News host Paul Murray says the reason smokers are continuously hit with higher and higher taxes is because “they have no political representation, no one will fight for th…

Illicit tobacco seizures have soared and under the counter sales at suburban shops are rampant with concern rising taxes will continue to fuel the black market.

It comes as the federal government considers whether to form a new task force that will issue on-the-spot fines to retailers selling cheap illicit tobacco with one MP warning the situation is currently “open slather”.

Last year, Australian Border Force, which heads the Illicit Tobacco Task Force, seized 633 tonnes of illicit tobacco – a jump of 46% on the previous year.

The untaxed product is ending up in suburban tobacconists and corner stores and being sold for $13-20 cheaper than legal cigarettes.

The Sunday Telegraph visited one small supermarket in Smithfield this week and was able to purchase a 20-pack of branded Manchester cigarettes for $20.

A shop attendant at a supermarket in Smithfield sells a Sunday Telegraph journalist a packet of illicit cigarettes. Picture: Sam Ruttyn
A shop attendant at a supermarket in Smithfield sells a Sunday Telegraph journalist a packet of illicit cigarettes. Picture: Sam Ruttyn
A contraband 20-pack of Manchester cigarettes cost $20. Picture: Sam Ruttyn
A contraband 20-pack of Manchester cigarettes cost $20. Picture: Sam Ruttyn

The contraband packet was pulled from under the counter and the journalist was told to put the cigarette in her pocket before walking outside.


At a recent parliament inquiry into illicit tobacco, the ITTF noted rising cigarette costs could drive increased demand for cheaper alternatives and increase profit margins for criminals.

An ABF spokesman said the illicit tobacco smuggling was already seen as an attractive market with a low risk.

“Organised crime groups are attracted to the potential profits that can be made from the illicit tobacco trade, as with other black economy activity,” he said.

Rolling tax hikes have widened the gap between legal cigarettes in Australia, around $33 a pack, and tobacco that can be purchased in China – about $5-6 for a pack of 20 – and smuggled into the country without paying customs duties.

The contraband packet was pulled from under the counter and the journalist was told to put the cigarettes in her pocket before walking away. Picture: Sam Ruttyn
The contraband packet was pulled from under the counter and the journalist was told to put the cigarettes in her pocket before walking away. Picture: Sam Ruttyn

The excise will be about $1 per stick from September due to a 12.5 per cent increase.

While the price of cigarettes in Australia has increased exponentially, it has had significant public health benefits with the smoking rate halving since 1995.

MP Craig Kelly, who chaired the inquiry into illicit tobacco, believes the solution lies not with scrapping the excise but in bolstering resources to tackle the black market.

“We have to have a much stronger deterrent for the people selling the tobacco at a retail level because at the moment it seems like it’s open slather,” he said.

Search dataset

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Merrylands

City rank

1

No of stores

14

Auburn

City rank

2

No of stores

12

Lidcombe

City rank

3

No of stores

6

Liverpool

City rank

4

No of stores

6

Marrickville

City rank

5

No of stores

6

Granville

City rank

6

No of stores

6

Guildford

City rank

7

No of stores

6

Campsie

City rank

8

No of stores

5

Newtown

City rank

9

No of stores

4

Cabramatta

City rank

10

No of stores

4

Load next 10 items Mr Kelly, a Liberal MP, said he would ask the committee to recommend the creation of a police task force that could issue on-the-spot fines for retailers caught selling illicit tobacco.

“If I’m a villain involved in criminal activity, these guys are entrepreneurial and they weigh up the risk versus reward,” he said.

“At the moment the risk versus reward is weighed in favour of illicit tobacco.”

As it stands, retailers can be fined up to $11,000 under The Public Health (Tobacco) Act 2008 for selling illicit tobacco.

Australia’s joint agency Illicit Tobacco Taskforce (ITTF) seized three large shipments of illicit tobacco worth more than $11 million in December, 2019. Pic: ABF
Australia’s joint agency Illicit Tobacco Taskforce (ITTF) seized three large shipments of illicit tobacco worth more than $11 million in December, 2019. Pic: ABF

But the wide availability of illicit cigarettes in suburban stores suggests enforcement is not consistent.

Tobacco manufacturers, as part of their ongoing campaign against government regulation of cigarettes, including plain-packaging laws that have dramatically reduced smoking rates, claim contraband and counterfeit tobacco is a growing problem.

The 2019 Illicit Tobacco in Australia report, released by KPMG today, which was commissioned by Philip Morris International and Imperial Tobacco, estimated illicit tobacco importations cost the country about $3.4 billion in lost tax revenue last year — a figure disputed by tax authorities.

The consumption of illicit tobacco has also jumped considerably, the report states, with one in five cigarettes now attributed to illicit tobacco.

According to KPMG’s tobacco-funded study, Sydney is the epicentre of illicit tobacco consumption.

The report claims just over 20 per cent of all empty packets of illicit tobacco found as part of the research were in Sydney last year – up from 11.9 per cent in 2018.

Almost 60 million cigarettes, including the brand freely available for purchase in western Sydney, were seized during a joint operation last year. Pic: ABF
Almost 60 million cigarettes, including the brand freely available for purchase in western Sydney, were seized during a joint operation last year. Pic: ABF
Illicit cigarettes found at the storage unit by an ABF task force. Pic: ABF
Illicit cigarettes found at the storage unit by an ABF task force. Pic: ABF

However the Australian Taxation Office argues the tax revenue lost is much smaller – around $670 million in the 2017/18 year – and the Cancer Council accuses the tobacco firms of “gross exaggeration” in their attempt to dissuade politicians from further regulation.

“The amount of illegal tobacco that the tobacco industry claims is being consumed in Australia is four times that estimated by the Australian Taxation Office – a gross exaggeration of what the official figures tell us,” Cancer Council Australia chief executive officer Professor Sanchia Aranda pointed out.

Illicit tobacco has been recently linked to major organised crime investigations, including alleged terrorism financing and drug trafficking.

Last week, underworld figure Michael Ibrahim was sentenced to 30 years jail for conspiring to smuggle 1.9 tonnes of drugs and tobacco into Australia.

Michael Ibrahim was sentenced to 30 years jail last week for attempting to smuggle tobacco and drugs into Australia. Picture: Police
Michael Ibrahim was sentenced to 30 years jail last week for attempting to smuggle tobacco and drugs into Australia. Picture: Police

However, law enforcement sources say the low penalties handed down for tobacco importation don’t serve as a deterrent.

Last year, four out of six people charged with tobacco importation were jailed with an average 22 month non parole period, the Bureau of Crime Statistics and Research showed.

The maximum penalty for the offence is 10 years in jail.

Imperial Brands Australasia’s Head of Corporate and Legal Affairs Kirsten Daggar-Nickson said along with federal resources, Australia needed state-based task forces to target retail enforcement.

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