Jim Chalmers says making cigarettes cheaper will not solve the booming trade in illegal tobacco, dismissing the call by the New South Wales premier, Chris Minns, to slash taxes on smoking.
Minns joined Victoria’s state government in blaming the high tobacco excise for a spike in organised crime that has led to arson attacks on businesses and stretched police resources.
The NSW premier said his state will propose a cut to the federal excise to deter illegal tobacco sales at the next health ministers’ meeting later this month, even as he admitted that it was “probably not a popular thing for a premier to say”.
“There’s been a tax on cigarettes for decades, and I understand that,” he said.
But he said the excise had “radically increased” over the past five years and the high taxes were causing people who would never usually break the law to buy illegal tobacco.
“They wouldn’t break the law in a million years, but they’re being dragged into a black market where they go to the store, they can either buy a $17 or $20 packet of illegal cigarettes, or a $60 packet of cigarettes.”
The excise accounts for three-quarters of the price of a packet of cigarettes, making them among the most expensive in the world.
On Wednesday, Chalmers joined the federal health minister, Mark Butler, in rejecting the view that cheaper cigarettes would solve the growing black market for tobacco.
“I don’t think the answer here is to make cigarettes cheaper for people,” the treasurer said.
“I think the answer here is to get better at compliance. And the [federal government] has to come to the table … with hundreds of millions of dollars in new funding to try and combat the scourge of illegal tobacco.”
“It is a substantial public health challenge still in our economy. It’s also a law and order challenge, and we’re addressing both of those things simultaneously.”
Butler said overseas evidence showed there was no clear link between lower prices and less crime.
“Price has an impact, but if you look at other countries that have substantially lower priced cigarettes than Australia – the US, some European countries, most in Asia as well – they also have thriving black markets,” Butler said.
“Because organised criminal gangs, no matter where they are, no matter what the price of legal cigarettes, recognise that black market cigarettes are a very easy way for them to make money. And the only way to stop that is to enforce good laws against bad people.”
But Victoria’s minister for casino, gaming and liquor regulation, Enver Erdogan, said the high price of legal cigarettes was one of “multiple factors” driving the growth of the illicit trade, which has sparked a turf war in the state that has seen more than 100 businesses firebombed.
“The price differential between the legal and illicit product is large. Accepting that tobacco is an addiction, and so for many people they’re going for the cheaper product, I think we do need a national approach,” Erdogan said.
National figures released on Wednesday revealed a drop of almost 16% in spending on tobacco products in the year to March, which Chalmers said reflected both the increase in illegal trade as well as more Australians quitting smoking.
“We have to resist the temptation to think it’s either 100% people giving away the darts, or 100% illegal activity,” the treasurer said.
“It’s both of those things. One of those developments is very good. One of those developments is very challenging. We’re not ignoring it.”
The most recent budget committed an additional $157m to fight the illegal tobacco trade, which was on top of the $188.5m over four years to border enforcement.
Tobacco excise revenues are expected to drop from $9.7bn in 2023-24 to $6.7bn in 2028-29, according to the budget papers.
