Illegal tobacco trade continues to hurt Australian economy

The illegal tobacco trade is costing the Australian economy up to $2 billion a year according to KPMG in the UK’s Illicit Tobacco in Australia 2018 Full Year Report.

Following the report, the tobacco industry has called for greater retailer enforcement against illegal tobacco, with revelations illicit trade represented more than 14 per cent of the total tobacco market in 2018.

The new report shows that in the last year, 2.1 million kg of tobacco had been purchased illegally in Australia, which would have represented $2.02 billion of excise had it been consumed legally.

The report covers the 2018 calendar year, but two recent illicit tobacco seizures have also highlighted the illegal tobacco trade in Australia.

In early May 2019, the Australian Border Force revealed[1] eight people were detained and deported for bringing in 177,063 undeclared cigarettes at Melbourne airport. At a raid weeks later in Sydney, police dismantled an organised crime syndicate that allegedly imported more than $9 million worth of illicit tobacco[2].[MS(1] [HL2]

Tammy Chan, Managing Director of Philip Morris Australia, said it was time stricter retail enforcement was applied to this issue.

“We are still seeing a significant amount of illicit tobacco coming into Australia,” Ms Chan said.

“We need a hardline stance to filter all the way down to retail level to curb this thriving black market.

“Honest, hard-working small business owners are faced with illegal competition and the statistics are showing that many people are consuming an unregulated product with unknown ingredients from many different origins.”

Key points from the report:

– The total volume of tobacco consumption in Australia in the full year 2018 was 14.8 million kg. This represents a 5.4% decline in total consumption since 2017.

– Total consumption of illicit tobacco declined by 11.1% between 2017 and 2018. This represents a decrease in the proportion of consumption from 15.0% in 2017 to 14.1% in 2018. This decrease is principally due to a decrease in consumption of unbranded loose tobacco.

– If this 2.1 million kg of illicit tobacco had been consumed legally, it would have represented an estimated excise value of AUD 2.02 billion.

– Contraband consumption accounted for the majority of total illicit tobacco consumption, with the proportion increasing from 51.1% in 2017 to 53.7% of the total illicit consumption in 2018. While the proportion of contraband consumption increased, its absolute consumption has decreased from 1.20 million kg in 2017 to 1.12 million kg in 2018. Contraband comprises of non-domestic contraband as well as Domestic Illicit Plains and Illicit Whites (non-domestic). Unbranded (or ‘Chop Chop’) consumption accounts for 44.4% of total illicit consumption; representing a 15.4% decline since 2017.

/Public Release.