A tobacco tax that's helped drive Australian cigarette prices to world-leading highs won't be lowered despite suggestions it has aided a rampant black market.
Treasurer Jim Chalmers ruled out changing the tobacco excise on Wednesday, dismissing NSW Premier Chris Minns' call that lower prices could help curb surging levels of illegal tobacco in the community.
Tobacco prices have been driven by a federal excise topping $1.40 a cigarette in March, excluding shop mark-ups, with the average pack of 20 costing about $40.
Tobacco tax revenue peaked at $16.3 billion in 2019/20 but has dipped to a projected $7.4 billion this financial year, which experts say illustrates cigarette prices becoming unaffordable and smokers turning to the black market.
Ruling out a change to the excise, the treasurer said the revenue decrease was for both good and bad reasons.
"More people are giving up the darts, but more people are also doing the wrong thing (and) I'm not convinced cutting the excise on cigarettes would mean that would be the end of illegal activity," Mr Chalmers said.
"I respectfully disagree with Chris … I don't think the answer here is to make cigarettes cheaper for people, the answer here is to get better at compliance."
Earlier in the week, Mr Minns said police had better things to do than tobacco enforcement and the "commonsense option" would be for the federal government to acknowledge the excise was not working.
He pointed out the excise had increased from $16 to $28 per pack in six years but total revenue was going backward as consumers fled to the black market.
NSW Treasurer Daniel Mookhey insisted he would raise the issue with his federal counterpart despite the flat rejection.
"We can't ignore the fact there's an interaction between the federal exercise and the emergence of illegal tobacco," he said.
Increased scrutiny on illicit tobacco came as police on Tuesday announced the arrest of seven people over 20 million untaxed cigarettes and other drug imports.
