Organised crime ‘windfall’ as illegal tobacco consumption rises and taxes fall
Oct 10 2017
Tax revenue from tobacco fell more than $200 million below official estimates despite an increase in the amount of tobacco being smoked and a recent 12.5 per cent rise in excise tax, analysis of federal government research reveals.
Retailers, cigarette companies and experts on illicit trade claim it is more evidence of a booming black market in illegal tobacco, which is estimated to losing the government between $1.5 billion and $4 billion a year in lost tax.
This is despite Australian Border Force seizing about 400 tonnes of illegal tobacco, worth about $294 million in evaded revenue, and prosecuting 45 smugglers in the past two years.
“The federal government excise increase is going into the pockets of organised crime,” said Rohan Pike, a consultant, illicit trade expert and founder of the Australian Border Force’s Tobacco Strike Team.
Mr Pike is calling for a co-ordinated national strategy to combat illegal tobacco using state and federal authorities to prevent its distribution and close-down illegal outlets.
“So many government agencies are in denial about the size of illegal tobacco smuggling,” said Jeff Rogut, chief executive office of Australasian Association of Convenience Stories, which represents some 37,000 outlets that each year generate revenues of about $37 billion.
“Border Force do a good job with major seizures but no regulator or agency appears to be interested in tackling this problem at street level,” Mr Rogut said.
For example, ABF recently arrested a Chinese national after thousands of importations of illegal cigarettes were traced to his address. Estimated duty and GST evaded for the cigarettes sized is more than $112,000.
But industry sources claim the specialist tobacconist the cigarettes were to be sold through is still operating, despite compelling evidence it has links to the smuggled goods.
According to the federal government’s Final Budget Outcome total excise and customs duty receipts were $197 million above the 2017-18 budget estimate despite tobacco estimates being $237 million lower.
The latest Australian Criminal Intelligence Commission report on drug monitoring reveals tobacco consumption is increasing nationally, particularly in Queensland and Western Australia.
“Much of the harm that Australians suffer at the hands of organised crime is due to the trade in illicit substances,” the report, which is based upon analysis of wastewater, concluded.
Organised crime gangs, typically from the Middle East and Asia, are heavily involved in selling illegal cigarettes markets and illegal outlets for about one-third of the recommended retail price with proceeds.
Retailers claim their revenues are being “devastated” by more than 600 organised crime-backed illegal and tobacco outlets being set up around Australia. They are also targets of increasingly violent armed robbers seeking cigarettes.
Tobacco industry chiefs and regulators fear the illegal industry is flourishing because of legal loopholes, turf wars between regulators, poor enforcement and puny punishments.
The powerful Black Economy Taskforce, which is expected to report in coming weeks, is expected to urge the federal government “blitz” illegal sales.