Federal Treasurer Jim Chalmers recognized the growing threat that illegal tobacco sales have become for Australia. He calls it a “serious crisis” that endangers Americans’ health and damages the federal fisc. The federal budget in March revealed a shocking $7 billion tobacco tax revenue shortfall. This drop has been attributed to an increase in black market cigarette sales. Now, New South Wales Premier Chris Minns is joining that chorus and asking for an immediate review of the current, high tobacco excise rates. As World Bank President Jim Yong Kim recently said, experts agree that excessive taxation is driving the forces of illegal trade.
Chalmers underscored the impact tobacco excise has as a public health tool to reduce smoking rates. He cautioned that the damaging impacts of high taxation are increasingly visible. With cigarette prices in Australia the highest in the world, the excise already makes up around three-quarters of these prices. The current federal policy includes a planned 5% annual increase in tobacco excise over the next three years, starting this September.
Impact of High Tobacco Taxes
The combination of elevated taxes and the emergence of alternative nicotine sources, such as vaping, has created fertile ground for illicit tobacco to thrive. Mr. Martin argued that the disincentives created by excessive taxation on wagers created barriers for the industry. He focused on how recent legislation exacerbates this catch-22.
“Police forces are stretched around the country with more pressing crime problems,” – Dr. James Martin
During that conversation, Dr. Martin underscored the momentous challenges that law enforcement agencies are facing right now. He stressed that they are focused on addressing pressing concerns such as intimate partner violence and terrorism. Yet he still made clear his disappointment with resource allocation. It’s an incredibly low priority for police to be spending their time and resources on fighting illegal sales of tobacco.
Government Response and Public Health Concerns
The federal government have recently engaged enforcement against the burgeoning illegal tobacco market. They’ve specifically set aside an additional $157 million for enforcement and compliance activities in the new budget. Chalmers understood the gravity of the situation. He commented that the government has “painted itself into a bit of a corner.” He noted that any attempts to halt or reverse the tobacco tax could be perceived as yielding to the interests of large tobacco companies.
“Tobacco excise is an important public health measure to encourage people to give up smoking,” – Jim Chalmers
Health Minister Mark Butler agreed with him on this point. He cautioned that if the state were to hit pause on the tobacco tax, it would be playing defense in the war against smoking. Minns, though, asked whether the ways we’re enforcing laws are actually reaching the core problem’s root, especially when it comes to connecting to enforcement policies.
“I’m completely in support of the public health messaging, but you’d be crazy to just turn a blind eye to the proliferation of illegal tobacco sales,” – Chris Minns
Minns called for a reassessment of the tobacco excise, advocating for a balanced approach that considers both public health objectives and the realities of illicit trade.
The Future of Tobacco Policy
With illegal tobacco sales now surpassing legal ones, policymakers must be under a lot of pressure to reconsider their approach. Minns specifically urged the federal government to evaluate how excessive excise taxes are driving illegal sales and jeopardizing expected tax revenues.
“Is it the best use of NSW Police time to be devoted to tobacco sales, when in the end the federal government’s not getting the excise that they thought?” – Chris Minns
These recent developments have led to important conversations among stakeholders from every political persuasion. Now they are looking forward to a second phase of possible tobacco tax reforms. The current turmoil over the border demonstrates the lack of a real, smart, sustainable strategy. This new strategy will need to carefully weigh public health priorities alongside acute law enforcement and taxation concerns.
