A scheduled rise in the tobacco excise means cigarette prices in Australia, already the highest in the developed world, will jump by nearly 7% on Monday.
The increase comes amid growing criticisms of the price-led anti-smoking policy, which has triggered an explosion in black market tobacco sales and an associated jump in violent crime.
With the Australian Taxation Office (ATO) estimating that one-fifth of tobacco sales are now illegal, some experts warn Australia has adopted a “prohibition-style” approach to tobacco control that is doomed to fail, and that the excise should be slashed to erode the incentives for illegal trade.
Excise will rise by 6.8% on 1 September: for a pack of 20 cigarettes it will rise from $28.06 to $29.97, or about $1.50 per cigarette.
The increase is a mix of a standard twice-yearly indexation that matches growth in earnings, alongside the third of three special annual 5% rises.
Becky Freeman, a health professor at the University of Sydney and a leading expert of smoking control, said while there could be a case for freezing the excise, the focus should be on cracking down on illegal sales.
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She pointed towards New South Wales and Victoria introducing tough new laws to combat the widespread sale of illegal smokes and vapes, but said more needed to be done and quickly to address what she called a “public health emergency”.
The South Australian government has created a special tobacco enforcement squad with powers to search premises without a warrant, seize illegal tobacco or vapes and shut the store for three months.
The Australian Border Force recently boasted it had intercepted a near-record haul of 2,091 tonnes of illicit tobacco products in the year to 30 June – more than three times the volume in 2019-20 and before the black market took off.
The ABF also seized 6m illicit vapes.
Economists and tax experts have pointed to the collapse in revenue from the excise as evidence that the price-led strategy is not achieving its goals.
A near doubling in the smoking tax rate over the five years has coincided with a halving in revenue from the tax, from $14.3bn in 2020-21 to an expected $7.1bn this financial year.
Chris Richardson, an independent economist, was critical of the decision to continue lifting the excise rate.
“Making a bad policy worse sounds very much like the definition of insanity: doing the same thing over and over again and expecting a different result,” Richardson said.
The NSW premier, Chris Minns, has joined Victoria’s minister for casino, gaming and liquor regulation in blaming high tobacco prices for a spike in violent crime related to the illicit trade.
Minns has previously called for a cut in the excise rate – a step that has been dismissed by Jim Chalmers.
A spokesperson for the treasurer said “we want to see tobacco excise revenue fall because more people are giving up smoking, not because of illegal trade”.
“That’s why we’ve invested hundreds of millions of dollars in our last two budgets on enforcement and compliance measures to crack down on illicit tobacco.”
