Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026

Dr RYAN (Kooyong) (12:19): Australia's illicit tobacco trade is now one of the fastest growing criminal markets in this country. It cost us an estimated $4 billion in 2023-24. It's bigger than the combined markets for cannabis, cocaine, heroin and ecstasy.

Since 2023, it has brought more than 200 firebombings and at least three homicides to Australians' suburbs. Our customs laws were written for another era—for the occasional small-scale duty dodger, not for the organised crime syndicates currently running Australia's national distribution networks and neon lit shopfronts on our high streets. This bill, the Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026, separates the offence of importing illicit tobacco from the offences of possessing and moving it around Australia, so that a shopkeeper in Malvern or a warehouse operator in Dandenong can be prosecuted without the Crown first having to prove exactly how the product came into the country.

It will allow the courts to draw the obvious inference from the obvious facts—that cigarettes sold for less than the excise and GST payable on them, with no documentation of origin, in packaging that ignores our plain-packaging laws, and carrying flavours which are already banned in this country are clearly illicit. The bill also strengthens the powers of investigators to obtain documents, and it closes off pathways used to shield assets from proceeds-of-crime action.

The assistant minister is right on this point: what hurts criminals is not the condemnation of our communities; it's losing the cash, the cars and the houses. So this is good legislation, but I want to be clear why we need it, because I'm concerned that the government could be about to cave to the tobacco industry, to the convenience store industry and to their lobbyists by cutting the tobacco excise.

If it drops the tobacco excise, this government will add to a long succession of short-sighted, stupid failures from both sides of politics in this very important policy area. The Howard government's 1999 reforms replaced a weight based excise with a per-stick system of tobacco taxation. That excise was indexed to the CPI until 2010, when Kevin Rudd's government increased it by 25 per cent.

In 2013, Prime Minister Rudd announced a four by 12.5 per cent series of automatic annual increases in the excise over and above the ordinary indexation. In 2016, the Liberal government legislated a second four by 12.5 per cent escalator, which operated between 2017 and 2020. That was already part of the Labor opposition's platform at that time, so it had bipartisan support.

In 2023, the current treasurer added another five per cent a year increase for three years, and alongside these increases the excise is automatically indexed twice a year. So, of the 4.3-fold increase in the tobacco excise that Australia has seen between August 2013 and September 2026, about three-quarters occurred under the coalition, which is now, quite remarkably, proposing cutting that excise by 80 per cent, taking it back roughly to where the Howard government left it in 2007—a tacit acknowledgement of its own policy failure.

The mess in which we now find ourselves, if we blame it on the tobacco excise, is one for which we can hold all of the major parties responsible. But it's my belief that the excise is only part of the problem; it is by no means all of it. In fact, the illicit market's take-off in 2020-21 coincided with the end of the escalator.

What changed after 2020 was not the tax. What changed was that, for the better part of a decade, we've seen enforcement which was close to non-existent and penalties which have been derisory, and, in most cases, anyone can open a tobacco shop without so much as a licence. Criminals have discovered that they can sell duty-not-paid cigarettes over the counter in broad daylight and nothing will happen to them.

So they have—by the tens of thousands. And the people who saw this first aren't the people in this place. They're the people in our communities.

In its submission to the Senate inquiry into the illegal tobacco crisis, Stonnington described the position that every Victorian council has found itself in: illegal tobacco shops multiplying along its shopping strips; residents and legitimate traders demanding action; and a council which has no power to licence, inspect or close tobacco retailers. Until recently, Victoria had 14 inspectors to supervise as many as 10,000 tobacco retailers across the state, and those 14 inspectors had to conduct their visits in pairs for their own safety.

In the May 2026 Victorian budget, the government committed $13.4 million to triple Tobacco Licensing Victoria's inspector numbers and to create new closure powers. But, even when that target is reached, we'll still only have one inspector for every 200-odd tobacco shops. The states and the local government areas need help.

Our councils know our shopping strips. They know which shops open last month and who owns the buildings. Through their rates databases, they know the identity of every property owner in their municipality.

Councils can be the eyes on the ground, and they are the level of government most committed to our communities, but they've never been given the tools or the partners to act on what they're seeing every day. This bill will give our federal agencies better tools. The task now is to make sure that the state licensing regimes, the closure orders and the landlord liability laws that are finally arriving in Victoria are actually backed by inspectors, a police interest and a commitment to enforcing them.

Illicit tobacco is not a tax problem. It's an enforcement problem, and the blatancy of the trade is its greatest weakness. Unlike the trade in heroin or cocaine, illegal tobacco needs a shopfront.

It needs a lease, a sign and a cash register. Every one of these shops is visible to passers-by. They're a blot on the landscape of our suburbs.

Every one is visible to a regulator and to a police force which actually choose to look. We wouldn't tolerate unlicensed shops selling alcohol or firearms or prescription medicines on our high streets. We shouldn't be tolerating this.

That leads me to the second half of this debate and the reason for my second reading amendment. In the last month, two parties in this parliament have announced their answer to organised crime is to cut the tax that organised crime is evading and that tobacco companies are paying. We've just heard from the shadow minister to that effect.

The coalition proposes to cut excise by 80 per cent, from about $30 a pack to $6. One Nation proposes a 75 per cent cut and a three-year freeze on indexation. Both of those proposals are being presented as crime fighting measures, but they are, in fact, nothing of the sort.

Consider the arithmetic. The tobacco excise is currently about $30.57 on a packet of 20 cigarettes. A budget-brand legal pack costs $40 or more.

An illicit pack sells for as little as $10—and as little as $7 by the carton. If you halve the excise, an illegal pack will still cost about $27. If you cut it by 80 per cent, the retail price will still be $16 to $26—as the coalition itself has acknowledged—which is still two to four times the price of illicit cigarettes.

If you abolish the excise altogether, an illegal pack will still cost more than a $7 illicit one. There is no reasonable level of excise reduction that would make any material difference to the supply chains run by serious and organised crime. Those calling for a cut in the excise never name a reduction that would make taxed cigarettes competitive, because there simply isn't one.

And that is the flaw in their argument. Nor does international evidence help the tax cutters. If high excise caused black markets, then low tax countries would have small black markets.

But this is not the case. About 65 per cent of tobacco sold in Malaysia and South Africa is illicit. In Brazil it's about half.

But all tax tobacco far less than we do. One country has actually tried the experiment that the opposition is proposing. In 1994, Canada halved its federal cigarette excise to fight smuggling.

Five provinces matched that cut. Prices in those provinces fell by almost half. But, within a year, the gap in smoking rates between the provinces that cut and those that hadn't had widened, because more young people started smoking and fewer smokers quit.

Teenage smoking rose for the first time since the 1970s. One study attributed around 190,000 additional daily smokers to that single decision by Canada. Federal revenue fell by billions, and the smuggling networks were not dismantled.

In fact, by 2008, contraband was back to a third of both the Ontario and Quebec markets. It still sits there. Canada bought a decade of decreased smuggling at the price of a generation of extra smokers, and then it got that same black market back.

That is the experiment that the coalition and the One Nation are asking us to repeat. There is no mechanism in Australian law to compel tobacco multinationals to pass a single cent of any excise cut onto smokers. On this year's budget, figures show a 50 per cent cut in customs duty could hand as much as $2.1 billion a year to three companies—about $900 million to British American Tobacco, $550 million to Imperial Brands and $440 million to Philip Morris—and 80 per cent would cut them even more.

And that prize explains the intensity of the lobbying campaign which is now being waged in this parliament. On 4 May this year Philip Morris appeared before the Senate inquiry in a closed session which was unlisted on the public program. That was the first platform given to a major tobacco company in this parliament in 16 years, and it was permitted despite Australia's obligations under article 5.3 of the WHO Framework Convention on Tobacco Control.

The Australasian Association of Convenience Stores, which is running the retail case for a cut in the excise, is led by a chief executive who began his career as a BAT trainee. Its policy adviser spent 20 years at Philip Morris. All three tobacco multinationals are paying members of the Australasian Association of Convenience Stores.

And the association was a founding member of the Alliance of Australian Retailers, the front group that the tobacco companies set up in 2010 when they were fighting plain packaging, until its funding was exposed and it was forced to withdraw. About half of the tobacco industry lobbyists in this country previously held positions in government. And the National Party, the only major party still taking tobacco money, accepted $137,500 from Philip Morris and $88,000 from British American Tobacco in the last financial year alone.

The tobacco industry has deliberately reframed a health and regulatory debate as a crime debate so that industry aligned voices can present themselves as neutral experts on law enforcement. But this is, in the end, a health debate. Smoking still kills 24,000 Australians every year—66 Australians every day.

Price is the second-most powerful reason smokers give for quitting, and young people and people on low incomes are the most price sensitive of all. The National Drug Strategy Household Survey 2025 reported daily smoking at a record low of 5.6 per cent, down from 19.5 per cent in 2001. Fifteen of Australia's leading health organisations, led by the Cancer Council, have put it plainly: even if we cut the tobacco tax altogether, illicit products will remain cheaper.

Legal tobacco will become more affordable. Industry profits will skyrocket. Smoking rates will increase, and people will die.

Illicit tobacco is primarily an enforcement and health issue. It is not a tax issue. So I ask the Albanese government and the health minister—who I understand just today has received an award from the Public Health Association of Australia lauding him for his work on the tobacco excise, cigarette smoking and the need to fight these things in this country—don't let a lobbying campaign and big tobacco bully you into a policy that every serious health body in this country opposes and that international experience has shown will not work.

There is a legitimate case to freeze the tobacco excise until enforcement catches up. There is no legitimate case for a cut in the tobacco excise. And so that with, I move the second reading amendment circulated in my name: That all words after "That" be omitted with a view to substituting the following words: the growth of the illicit market is the product of many years of inadequate enforcement, weak penalties and the absence of retail licensing, and that there is no good reason to cut the tobacco excise at this point in time".

And I commend this bill to the House. The DEPUTY SPEAKER ( Dr Garland ): Is the amendment seconded? Dr Scamps: I second the amendment and reserve my right to speak.