The government has pushed back against calls to rethink tobacco excise, insisting Australia’s exploding illicit cigarette market is an enforcement issue rather than a sign taxes have gone too far.
The stance comes as illegal tobacco consumption surges across the country, with nicotine use 40 per cent higher in 2025 than it was in 2017.
WATCH THE VIDEO ABOVE: Illegal tobacco trade costs budget $8 billion
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The black market in tobacco is forecast to cost the federal budget more than $8 billion in lost revenue.
With NSW Police reporting they have run out of storage space for seized illegal cigarettes, the state’s Health Minister Ryan Park has urged the federal government to review its approach to tobacco taxation.
But Housing Minister Clare O’Neil signalled the government remains committed to its current excise settings, arguing the focus should instead be on cracking down on organised crime.
“This is not a tax problem, it is an enforcement problem,” O’Neil said.
“What we need to do is lift the protections on the border to try to stop illegal tobacco coming into Australia and then work with the states to stop it being sold in corner shops around the country.”
O’Neil said authorities were already making significant seizures as governments worked together to disrupt the illegal trade.
“Police are seizing massive amounts of illegal tobacco right around the country,” she said.
She said the government is working in line with advice from Australia’s leading health bodies.
“Organisations like the Cancer Council and the Australian Medical Association are saying don’t do this because all you’re going to do is encourage more Australians to smoke and give billions of dollars back to big tobacco companies,” she said.
“Better enforcement of our laws is the answer.”
Housing Minister Clare O’Neil has signalled the government remains committed to its current excise on tobacco. Credit: AAP/Sunrise
The debate comes as Australia’s illicit tobacco trade continues to expand despite record excise rates, with organised crime groups turning the black market into one of the country’s most lucrative criminal enterprises.
The trade has fuelled violent turf wars, extortion, and fire-bombings targeting tobacconists and other businesses as syndicates battle for market share.
Even without the excise, however, illicit cigarettes would still be cheaper than their legal counterparts.
The Coalition has stopped short of calling for an excise, but Opposition Finance spokesperson Claire Chandler said “every option needs to be on the table” as authorities struggle to contain the illegal trade.
“There is no question that one of the reasons it is so out of control at the moment is because that excise is too high,” Chandler said.
Chandler argued there may be a “sweet spot” where excise remains high enough to discourage smoking while reducing the enormous price gap fuelling demand for black-market cigarettes.
She said Tasmania alone seized five million illegal cigarettes last financial year, five times more than the previous year.
“We don’t want to be doing anything that would see our smoking rates massively increase, but the reality is they’re increasing at the moment off the back of the illegal trade anyway,” she said.
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