Australia’s opposition coalition has proposed slashing the tobacco excise by 80% as a strategy to combat illicit tobacco markets, which have grown to dominate cigarette consumption in the country. The proposal, accompanied by a $200 million enforcement initiative, aims to undercut black market pricing and regain regulatory control. However, public health experts have raised significant concerns about this approach.
Tobacco control specialists from major Australian universities have argued that enforcement of existing laws should take precedence over tax reductions. They point to supply chain monitoring, tracking of cigarette imports, and enforcement against illicit retailers as more effective strategies. Experts note that illicit tobacco markets are shaped by enforcement capacity, organised crime opportunities, retail controls, and border management—factors that tax cuts alone cannot address. One researcher emphasized that lowering prices for legal cigarettes would likely trigger corresponding price decreases in illicit markets, rendering price competition ineffective without dismantling underlying criminal supply networks.
Alternative approaches recommended by experts include reducing the number of legal tobacco retailers, conducting sustained public health campaigns highlighting smoking harms, and directing excise revenue toward free nicotine replacement therapy. International track and trace systems and enhanced border monitoring have been identified as proven tools for controlling tobacco supply. One economist acknowledged that temporary excise reductions combined with enforcement increases might serve as a short-term circuit breaker, but cautioned against making low tobacco taxes permanent.
The context for this debate reflects a significant market shift in Australia. Illicit tobacco accounted for an estimated 80% of cigarettes consumed recently, with untaxed packets selling for as little as $10 compared to over $40 for legal products. Federal excise revenue has declined sharply from $16.3 billion in 2019-20 to projected figures of approximately $4.8 billion for the current year. The opposition has pledged to reduce the current excise rate of around $30 per packet to approximately $6, while also proposing legalisation and regulation of vaping products.
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