Latest tobacco excise increase to hurt small business

The latest round of excise increases on tobacco products was introduced September 1, with The Alliance of Australian Retailers (AAR) expressing concern that retailers operating legitimate small businesses are hurting while criminal groups involved in the illicit tobacco trade are profiting.

The AAR represents thousands of legitimate tobacco retailers across Australia, and says that when cigarettes become significantly more expensive, consumers simply look for cheaper products or increasingly turn to the black market.

“[The latest] excise increase will only fuel the illicit tobacco trade, which means retailers are impacted, as is the federal Government, which loses revenue,” Bob Stanton of the AAR and owner of Freechoice Tobacconist Stores, Myaree, WA said.

“It is well documented that the illicit tobacco trade is a growing and continuing problem in Australia.”

Illegal tobacco represents 14.5 per cent of total consumption according to KPMG’s ‘Illicit Tobacco in Australia Full Year 2015 Report’. Furthermore, if this tobacco had been consumed in the legitimate market, it would have represented an excise amount payable to the Australian Government of approximately $1.35 billion.

“This issue is hurting retailers and has the potential to threaten the viability of small business all around Australia,” Mr Stanton said. “In addition to the impact tax rises have on the illicit trade, our members are unable to compete with the larger chains, who have greater pricing flexibility and can absorb some of the costs following excessive tax increases.

“Small businesses play a vital role in our community and the shift to large retailers or to the black market will further damage the Australian institution of corner shops and convenience stores, not to mention jobs and income for thousands of Australian families.

“The AAR has been calling for increased focus on addressing illicit tobacco trade and we are encouraged by the feedback from relevant authorities, but more must be done to stamp out this problem in the long term.

“We urge government and law enforcement to continue their focus, ramp up policing and recognise the link between high excise and illicit trade.”

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