Slash the tobacco tax: Monash MP

Up to 80% of tobacco is now bought on the black market. Photo: Australian Border Force

By Catherine Watson

IN AUSTRALIA the cost of cigarettes has virtually tripled over the past two decades. A legal 20-pack of cigarettes now costs more than $40, of which more than $30 is excise duty.

Do you agree that the sales tax on cigarettes should drop by up to 80 per cent to stamp out the illegal trade?

The rationale: the high prices deter smoking (a health benefit) and the excise swells the Government’s coffers.

But in a strange case of unintended consequences, most smokers are paying less for their smokes than they did 20 years ago.

The Australian Bureau of Statistics (ABS) estimates that around 80% of the tobacco consumed by Australians now comes from illicit sources.

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The cost? Around $15 a packet, at a small shop near you, of which not a cent of excise duty is paid to the government.

Now a Coalition taskforce report co-authored by Monash MP Mary Aldred and Tasmanian Senator Richard Colbeck lays bare the numbers.

Despite repeated increases in excise, nicotine consumption has risen by around 40% between 2017 and 2025, according to the Australian Bureau of Statistics.

Releasing The Illicit Tobacco Crisis in Australia this week, Ms Aldred said the illicit tobacco crisis is no longer just a health and economic problem. It is also a major law and order crisis that will continue to worsen without urgent action.

Since 2023 criminal syndicates have been linked to more than 200 firebombings, while extortion, intimidation and gangland killings are on the rise.

The report finds that record enforcement alone is not reversing the trend. The Australian Border Force recorded 23,097 detections in 2024–25, seizing 2.53 billion cigarette sticks and more than 435 tonnes of loose-leaf tobacco, while stating plainly that it cannot seize the problem away.

Meanwhile tobacco excise revenue has fallen from around $16 billion at its 2019-20 peak to around $8 billion in 2024-25. It is expected to halve again to around $4 billion in 2025-26, and to fall to $2 billion by 2029-30.

Their report makes several recommendations. The most contentious is to cut the tobacco excise rate by up to 80% to break the organised crime business model.

Senator Colbeck said Australians were now being supplied by criminals in their own suburbs.

“It’s time to dispense with the fantasy that the price of cigarettes in Australia is $50-$60 per packet. When up to 80% of the market is paying organised crime prices of $15-$20 per packet that is the real price of cigarettes in Australia today.” Senator Colbeck said.

“We absolutely don’t want people to smoke, but this is no longer just smoking issue. It is about who controls a billion-dollar market in our economy: the Australian Government or organised crime?"

Recommendations

Drastically reducing the tobacco excise rate, with a reduction of up to 80% needing to be considered to break the organised crime business model;
Establish a target of 5% for Australia to achieve an "Effective Zero" smoking rate, reduced from the current objective of 10%;
Convening a National Cabinet specifically on illegal tobacco to reset Commonwealth and state cooperation on enforcement, licensing and closure powers;
Review State and Federal law enforcement settings to ensure agencies have the funding they need and are as coordinated as possible;
Establishing a highly regulated and licensed framework for the legal sale of vapes, with manufacturing standards and age limits;
Launch properly resourced and refreshed education campaign on the health impacts of illegal vaping, smoking, and the health impacts of illegal tobacco;
Requiring Australia Post to mandate content declarations, with corresponding powers of inspection and seizure; and
Actively investigating and prosecuting unlawful online tobacco and vape sales through a properly resourced and coordinated law enforcement group.

The Illicit Tobacco Crisis in Australia