Who’s Winning the Tobacco War?

Black market tobacco and vaping in Australia is a real problem. I raised concerns that, while seizures have increased by 38%, there’s no clear data showing whether that’s actually making a dent in the total illicit market.

Even the department couldn’t tell me how much illegal tobacco is getting through compared to what’s being stopped. They admitted that assessment is still pending in a report from the Illicit Tobacco and E‑cigarette
Commissioner.

I asked for clarity on illegal vape consumption, noting that import figures alone don’t tell the story, especially when some products are being made domestically. Again, the answer was that they don’t know how many illegal vapes are actually being used across the country, only how many have been intercepted at the border.

I raised serious concerns about the criminal activity tied to this black market — violence, intimidation and organised crime. Yet no-one present could provide figures on how many violent incidents are linked to illegal tobacco and vaping. I was told that that information sits with law enforcement agencies, not the commissioner.

On the financial side, I asked how much revenue Australians are losing due to illegal tobacco. While officials highlighted that billions in evasion have been prevented through seizures, they still couldn’t provide a clear figure for total revenue lost. I pointed out that estimates suggest the cost could be as high as $8–9 billion annually, which underscores just how massive this black market has become.

What we’re dealing with here is a large, organised criminal enterprise, often driven from overseas, and that we need proper data on the size of the market and the broader social costs. Without that, we’re flying blind.

Finally, I asked Minister Watt directly on whether its excessively high tobacco taxes are driving ordinary Australians into the illegal market by making legal products unaffordable.

True to form, Minister Watt flatly rejected that connection, yet offered no evidence to support that position. I pointed out to him that this approach risks empowering organised crime while reducing government revenue, placing greater burdens on taxpayers.

Transcript

Senator ROBERTS: Mr Reynolds, a constituent says: ‘If the seizures have increased by 38 per cent, what has been the proportion of the total growth in the illicit tobacco market? Has it grown by more than 38 per cent? How do we know that?’ Compliments to you for the seizure, but how do we know if that has had a big impact?

Mr Reynolds: It’s a reasonable assessment that there has been an increase in the amount of illicit tobacco coming into the country. But I’m not in a position to tell you what the delta is. The amount that we get on the
border to the amount that is coming into the country is not a figure that I have for you.

Senator ROBERTS: You don’t have it?

Mr Reynolds: What I’d offer is this: the Illicit Tobacco and E-cigarette Commissioner is working through an assessment of what that delta is, and that will be provided in a report to the government.

Senator ROBERTS: Commissioner, when do we expect that report?

Ms Foster: The commissioner gave evidence earlier that she was just finalising the report at that moment.

Senator ROBERTS: So we should see that soon? Will that report contain an assessment or an estimate of the total illicit tobacco market size?

Ms Shuhyta: It will.

Senator ROBERTS: Thank you. That’s good. How many illegal vapes were consumed in Australia in the last 12 months? I say ‘consumed’ because I understand some are being made here. Importation figures are less relevant than they are for tobacco; is that correct?

Mr Reynolds: I can tell you we allowed 1.2 million legal vapes into Australia and we intercepted six million illegal vapes on the border coming into the country. But I’m not in a position to tell you how many illegal vapes were consumed in Australia during the financial year.

Senator ROBERTS: Thank you. How many acts of violence were committed in Australia that were directly related to illegal tobacco and vapes? I’m talking about murders, fire bombings, assaults and similar acts or threats of violence. We know from tobacconists that they’ve been threatened. Some have been shut down.

Mr Reynolds: I think that’s really a question for, potentially, the Australian Federal Police—or the Australian Criminal Intelligence Commission may have an answer to that question for you.

Senator ROBERTS: Is there someone from the AFP who could answer that—or perhaps the commissioner could.

Ms Foster: The AFP is appearing later this evening.

Senator ROBERTS: Thank you. Does the commissioner have any idea of that? You’re in charge of coordinating stopping this.

Ms Shuhyta: I don’t have the exact numbers in front of me, no.

Senator ROBERTS: Are you able to get them on notice?

Ms Shuhyta: I will do my best to work with law enforcement.

Ms Foster: I think the question is best directed to the law enforcement agencies rather than the ITEC commissioner. They will be here later.

Senator ROBERTS: Isn’t the ITEC commissioner overseeing and coordinating everything?

Ms Foster: She’s coordinating the response, but, where there is a specific function like law enforcement, those questions are best directed to the specific agency.

Senator ROBERTS: Commissioner, how much government revenue has illegal tobacco taken out of the budget?

Mr Reynolds: I don’t have that figure. That may be an inclusion in the ITEC commissioner’s report to the government. What I can tell you is that we have prevented $4.4 billion worth of evasion by intercepting 2.5
billion cigarettes and over 400 tonnes of loose tobacco on the border.

Senator ROBERTS: Thank you for that. Those figures and the number of cigarette sticks you’ve intercepted are pretty impressive, but my understanding is that the government has lost about $8 billion or $9 billion a year on excise due to illegal tobacco coming into the country. We need to understand the size of the overall market, because it’s huge. We also have to understand the costs of the crimes being committed. We’ve got criminal gangs working from overseas, as I’m sure you’re aware, who are taking over tobacco trade in this country.

Mr Reynolds: Indeed. The ITEC commissioner has already given evidence that that report will be provided to government; that’s yet to be forthcoming.

Senator ROBERTS: I must compliment you on your evidence; you’re very direct, which is good. Minister, do you consider the government’s very high tobacco duty is the reason otherwise law-abiding citizens are prepared to buy illegal tobacco for generally a third of the legal price?

Senator Watt: No.

Senator ROBERTS: Any reasons?

Senator Watt: There’s absolutely no evidence to suggest that argument.

Senator ROBERTS: You’re joking?

Senator Watt: No.

Senator ROBERTS: Minister, is this office designed to make it look like you’re doing something to solve a problem your greedy tax grab created—and your predecessor’s?

Senator Watt: No.

Senator ROBERTS: No data, just meetings—empowering organised crime, decreasing revenue that taxpayers have to make up, and you just say ‘no’.

Senator Watt: You asked me a question, and I said ‘no’.

Senator ROBERTS: I’m asking you: are you ignoring the data to just put in meetings, empowering organised crime and decreasing the revenue to the government?

Senator Watt: No.

Senator ROBERTS: Thank you very much.