Combatting Illicit Tobacco Bill 2026
Mr SMALL (Forrest—Opposition Whip) (17:58): In a debate like this, I think we should start with some pretty basic human behaviour because a brief study of human history would tell us that, whenever you seek to limit human behaviour with enforcement in the form of punitive taxes, human behaviour and human ingenuity always win. Let's go back to England and Wales in 1696, when a tax was levied on windows.
People responded to this by bricking up their windows, and that's why you can still see Georgian buildings today with their window openings bricked up. It was known at the time as a tax on light and air and is sometimes credited as the source of the phrase 'daylight robbery'. When it comes to the tax levied on each cigarette in Australia today, some local constituents tell me that it resembles daylight robbery.
At about the same time in England, in 1662, the fireplaces were taxed. People then responded by blocking up chimneys, occasionally with fatal results from poor ventilation. In 1784, also in Britain—we could learn a thing or two from all these new tax ideas—bricks were taxed by the number of bricks taken to build a dwelling, so manufacturers simply made bricks bigger.
That's why you see Georgian buildings featuring unusually large bricks. This is not a new phenomenon. We've seen wallpaper taxes, glass taxes, clock and watch taxes, beer taxes.
There were salt taxes in France, driving mass salt smuggling, which was a genuine grievance feeding into the revolution. Indeed, a salt tax in India was part of the social disruption that led to Gandhi's 1930 salt march. We, of course, saw in the US a particularly dramatic example between 1920 and 1933.
It wasn't just a punitive excise tax on drinking; it was just an outright ban: prohibition, which saw a nationwide surge in organised crime and black-market activity. I think that is useful to frame the conversation today about what is driving the illicit tobacco market, or the black market for cigarettes, in Australia. Any cursory examination would tell you that it is the excise tax.
We have got to the untenable position where a lawful packet of cigarettes in Australia might cost you some $50 or $60, and the black-market cost for that same packet of cigarettes is about $15 or $20. Australians under pressure, as they are during this cost-of-living crisis, suffering under the rampant inflation in our economy that the Albanese government is overseeing, are responding by making the difficult choice of knowingly breaking the law, because illicit cigarettes are less than half the price.
I met with an IGA owner in my own electorate some months ago who opened his books to me and also disclosed that he'd been doing some online shopping. He showed me the screenshots, and it appeared to me that Australia Post might well be the biggest courier of black-market cigarettes in this country. He was able to, through a Facebook group, buy cigarettes that were cheaper than the wholesale price that he pays through his IGA supermarket.
Worse than that, he showed me his books over the last three years. The rise of black-market cigarette sales has taken $1.5 million directly out of that business, a small, family owned business in my electorate. This is a crisis and not just in the terms that we have heard on both sides of the chamber tonight about the firebombings and the crime and the insurance premiums and the like but also from the kick in the guts to those retailers who are trying to do the right thing.
This same IGA owner—I credit his meeting with me because I left vastly illuminated, as I'm not a smoker—made the point that these cigarettes he was able to buy very cheaply through Facebook and obviously therefore via organised crime were branded cigarettes. They were beautiful. There was a lovely packet with the gold embossing of 'Benson & Hedges' in all its glory.
There was nothing about the health risks of cigarette smoking on that packet of illegal cigarettes. Then he showed me what a lawful packet today looks like. I wasn't aware that, far beyond just having the plain packaging with the health warnings that we have, each cigarette lawfully purchased in Australia actually has to carry the health warning on it.
So out of the packet which has health warnings all over it you take a cigarette that also has health warnings all over it. The idea that we can approach this issue of illegal tobacco ignorant of the fact that we're driving people away from a product that has all the health warnings on it towards a product that instead carries all the branding that the then Labor government banned more than 14 years ago seems to me to be an extraordinary oversight at the very best.
Unless we acknowledge that human behaviour is at the centre of this, we're not going to be effective in tackling the scourge. Whilst stronger enforcement and the sorts of measures that are featured in this bill—including the increased appropriations to our enforcement agencies—are welcome, they're not going to fix the problem. That's where we need to be honest with the Australian people.
They can see it happening around them every day. In my community, there have been a number of raids. Indeed, I met with the south-west police recently to discuss that.
They have to admit that their resources are stretched. They are still trying to deal with all of the normal sorts of enforcement that, rightly, only the police can do. WA is a long way from Canberra, and so the AFP are also stretched in their resourcing presence in Western Australia, naturally focusing on Perth.
My electorate is a couple of hours south of Perth, and the problems we've had with illegal tobacco have gone right down to the bottom of my electorate, in Margaret River, and further south to Augusta. So you're talking about dragging police away from the very serious sorts of enforcement they need to be doing. They should be getting after murder and violent crime.
They should be chasing down child exploitation. They should be monitoring our road safety. They should be doing all of these things.
The police have readily admitted to me that a focus on tobacco enforcement is not included in their workload—and I understand why. It's simply outside the scope of their normal responsibilities. The scale of this problem should be pretty apparent to everyone living in this country.
But what is missing, and I know coalition speakers have focused on this for good reason, is the impact that the rise of black-market cigarettes has had on the budget. When we go back to 2012 or 2013, immediately after the plain-packaging legislation, we can see that excise tobacco was sitting at about $18 billion a year. The fact is that this year's budget papers have forecast tobacco excise at just $2½ billion, showing an almost complete collapse in the collection of that revenue, in the face of rising smoking in Australia—and that's the important point.
This isn't reflective of the fact that we've eliminated smoking in the community. In fact, some evidence suggests quite the opposite, that we are seeing more and more smoking in young people. I do wonder if it's because they're seeing cigarettes that simply aren't subject to the health warnings and the like that we would otherwise require in this country.
To see between $8 billion and $11.8 billion in excise being evaded every year, depending on whose estimate you accept, is having a massive impact on communities across the country that are crying out for basic services like new hospitals. Indeed, the Margaret River hospital in my electorate hasn't been upgraded in 25 years, despite the fact that the local population has more than tripled in that time and the number of people living there expands even more during peak tourist season.
We are seeing this desperate need for investment in health infrastructure across the country and we are seeing a collapse in the revenue associated with tobacco excise. We have to recognise why illegal tobacco is increasing. In this case, the answer is not necessarily obvious.
We ought to be talking about slashing tobacco excise in this country—not by five per cent, not by 10 per cent but by more than 50 per cent—because, until the price of a lawful packet of cigarettes is within a couple of bucks of the price available through the black market, we are simply not going to change that behaviour. Worse than that, we are making criminals out of ordinary Aussies who are struggling to put food on the table, get their kids to school and maybe have a packet or two of cigarettes a week.
I don't think it's fair that we make criminals out of innocent people, I want to see the government shift its focus, if you like, away from this ever-increasing idea of more enforcement, more resourcing for agencies to chase these people down. The numbers speak for themselves. The ABF, the Australian Border Force, seize some 2½ billion cigarettes a year, which is a 320 per cent increase in seizures.
That's great, but it's simply a drop in the ocean when it comes to the number of people who are freely accessing black-market cigarettes in this country. Indeed, I understand that authorities have recognised the problem themselves and that the Australian Border Force have said, 'We can't seize our way out of this problem.' Indeed, I've seen some estimates that, provided more than 15 per cent of the product being illegally imported into the country makes it through our Customs and Border Force checks, these organised crime gangs are profitable.
So when you consider the risk-reward context, as my local police have put to me, running a black-market tobacco operation, where you might get a shutdown notice issued for 30 days and a small civil penalty applied to a person convicted of an offence—these are organisations that are making billions of dollars a year—versus the risks they take when they participate in the illicit drug trade, where people who are caught end up in jail for 10, 20 or more years, it's no wonder that even the criminals are turning their minds to the black market of cigarettes and going, 'This is where we're going to be playing.' It's just basic human behaviour.
When you understand that behaviour, I think we need to be applying that to the way we legislate here. There have been almost 300 firebombings and arson attacks linked to tobacco turf wars alongside robberies, extortion, kidnapping and murder. This isn't something that we're talking about as the plot for a Hollywood thriller.
This is playing out in communities across Australia. If we're honest about why, we ought to see the government taking action to slash the excise on tobacco. In my part of the world, we're also looking at the rise of bootlegging—black market alcohol—and it is far more prevalent than you might think.
Indeed, the ATO themselves estimate some $800 million of forgone excise on alcohol.. I won't focus on this, because we are debating tobacco here tonight, but the same point stands in that punitive taxation is creating an opportunity for organised crime to exploit ordinary Australians who are just after a little vice to make life that little bit better in their own way.
I don't think that we should be making criminals out of those Australians. We should be focused on normalising excise tax at the same time as tightening up some of this enforcement. Legal tobacco sales are collapsing.
They're hurting the retailers. They're hurting the small business people, who we should be backing in this country, and the consumers themselves are effectively ordinary Aussies we're making criminals out of. I think this bill falls a long way short of where we could be in this very needed and very timely debate in this country.
On that, I thank the House.