One in seven cigarettes consumed last year was illicit

The latest report by KPMG estimating the size and value of the illegal tobacco trade in Australia found that 14 per cent of total tobacco consumption in 2015 was illegal.

KPMG estimates that if this quantity of tobacco had been sold legally, it would have generated around $1.49 billion in tobacco excise for the Government last year, an increase on the estimated $1.35 billion in tobacco taxes lost to the black market in 2014 and $1.1 billion in 2013.

KPMG also estimates that 2.4 million kilograms of illegal tobacco was consumed in Australia in 2015, which equates to about three billion (or one in seven) cigarettes.

“To put that into perspective, if these cigarettes were placed end to end they would circle the earth six times or reach two-thirds of the way to the moon,” Philip Morris Limited Manager Communications Simon Dowding said.

“Comprehending the size of the illegal tobacco problem in Australia helps underscore how serious this issue is. All illegal tobacco is revenue lining the pockets of the organised criminals involved in smuggling and selling in dodgy outlets across the country.”

According to the KPMG report, Australia has the highest price of cigarettes in the Asia Pacific region. A pack of 20 Marlboro cigarettes currently costs, on average, about $23.65. The same pack of cigarettes costs about $3.20 in China and South Korea, “which are primary sources for illegal branded cigarettes”, Mr Dowding adds.

“If it weren’t for the record-breaking seizures made by the Australian Border Force [ABF] and its dedicated Tobacco Strike Team over the past 12 months, the illicit tobacco trade could be much worse,” he said.

“Last year saw the largest illegal tobacco seizure in Australian history when the ABF intercepted 71 tonnes of illicit tobacco in three shipments destined for the black market. This illegal shipment would have defrauded the Government of about $27 million in tobacco excise.

“As the KPMG report and the increased number of tobacco seizures demonstrate, there is no line smugglers will not cross or length they will not go to. Industry, retailers, government and law enforcement all have a role to play in working together to prevent illicit tobacco gaining a permanent foothold in this country.”

$1.49 billion lost to budget bottom line

Commenting on the KPMG report, Imperial Tobacco Head of Corporate and Legal Affairs for Australasia Andrew Gregson said: “With revenue under pressure, capturing some of this estimated $1.49 billion would certainly be helpful to the budget bottom line.

“The year ahead is clearly an ideal time for the federal Government to further crack down on illicit tobacco and for the taxpayer to reap the benefit.

“The Government could take a number of steps to help crack down on the tobacco black market, including opting for a more stable excise system, boosting investment in the Australian Border Force Tobacco Strike Team and changing relevant legislation to make enforcement easier.”

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