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Michael J. Tyler
- March 3, 2025
Australia’s tobacco excise policy was designed as a public health measure to reduce smoking rates. However, the dramatic price hikes on cigarettes have unintentionally fuelled an expanding black market, leading to organised crime, gang violence, and economic instability. The policy, while effective in deterring legal tobacco purchases, has simultaneously created a lucrative illicit trade controlled by criminal syndicates.
Skyrocketing Prices and the Rise of the Black Market
Over the past decade, continuous excise increases have pushed the price of a legal pack of cigarettes to nearly $50. In contrast, illegal cigarettes can be purchased for as little as $15, creating a massive financial incentive for consumers to turn to black-market suppliers. This disparity has driven the rapid growth of illegal tobacco sales, which now threaten to overtake legal smoking in Australia.
Gang Wars and Violent Turf Battles
The profitability of the illegal tobacco trade has drawn the attention of organised crime groups, leading to a surge in gang-related violence. In the past 18 months, more than 200 arson attacks have been recorded against tobacconists, as rival gangs engage in fierce turf wars. This unprecedented level of violence has not only endangered innocent lives but has also put immense pressure on law enforcement agencies struggling to contain the escalating conflict.
Legitimate Retailers Under Siege
Australia’s small businesses and legitimate retailers are among the hardest hit by this crisis. As more consumers turn to black-market tobacco, store owners face declining sales, making it increasingly difficult to survive. Worse still, retailers are being directly targeted in arson attacks, leading to skyrocketing insurance premiums—some as high as $100,000 annually. Many businesses are now struggling to remain operational amid both financial losses and physical threats.
Lost Government Revenue and Economic Implications
While the government initially enjoyed increased excise revenue from higher tobacco prices, the explosion of the black market is now eroding these gains. Forecasts predict a $700 million decline in tax income between the next financial year and 2028-29 due to declining legal tobacco sales. This revenue shortfall threatens funding for crucial public health programs and other government initiatives.
The Need for Policy Reform: Finding a Balanced Approach
Experts argue that Australia must reconsider its approach to tobacco taxation. While reducing smoking remains a priority, the current policy is inadvertently empowering criminal networks and fostering an unregulated, dangerous market. Proposed solutions include freezing further excise increases, intensifying enforcement against illegal sales, and exploring harm-reduction strategies such as regulated vaping alternatives.
Conclusion: Time for a Smarter Strategy
Australia’s aggressive tobacco excise policy has backfired, shifting the problem from legal markets to organised crime syndicates. The consequences—violence, economic strain, and declining tax revenue—highlight the urgent need for a more balanced strategy. Policymakers must address these unintended effects before the crisis worsens, ensuring that efforts to curb smoking do not come at the cost of public safety and economic stability.
Michael J. Tyler
