Tax increases on cigarettes will trigger black market boom of tainted tobacco
Friday 18 May 2018
- Analysis for The Feed by Associate Professor James Martin, Criminology Discipline Convenor, Swinburne University of Technology
The latest budget outlines a suite of measures aimed at recouping $3.6b from the illicit tobacco trade, including expanded powers for the Australian Tax Office and the creation of an Illicit Tobacco Task Force, which will sit within Peter Dutton’s newly created security and surveillance behemoth, the Department of Home Affairs.
Put simply: if our experience with black markets for other drugs is anything to go by, increasing the tax on tobacco alongside the government’s grandiose plans to kill off the black market will not work – it will make matters worse.
We know that when tobacco taxes go up, so too does organised crime. When people cannot afford a legal product some choose not to buy it, but others – the poorest people in the community – buy from the black market. This creates a number of problems. The government misses out on making money because they can’t tax anything on the black market, and there are serious health implications associated with using tobacco that is grown in an unregulated environment where the use of pesticides and other additives may make these products even more dangerous to consume than usual.
Widespread consumer demand for affordable tobacco will be met not by regulated retailers but by criminal networks with the contacts and infrastructure necessary to either import tobacco from overseas or grow it illegally here in Australia. Black markets for drugs are the lifeblood for organised crime groups operating in Australia. They are also notoriously difficult to control, as the potential for vast illicit profits incentivise offenders to innovate increasingly sophisticated methods of smuggling and distribution, despite the risk of prosecution.
While a tobacco tax has played an important role in reduce smoking rates, it also entrenches economic inequality. Indeed one of the reasons that tobacco taxes have not been implemented as widely in other countries is that they are regressive – the financial impact of tobacco taxes fall most heavily on disadvantaged people, including lower socio-economic groups, Indigenous Australians, migrant communities and the mentally ill – smoking rates for all of these groups exceed the national average. Smoking is obviously highly addictive and not all smokers will quit in response to financial disincentives like a tax, and instead will simply forfeit much of their money to the government.
Australians already pay a higher price for cigarettes than they nearly any other country on Earth. Increasing the tobacco tax is not a reasonable move. And neither is the creation of a costly Task Force. We should be looking for more creative measures to decrease smoking – ones that don’t create opportunities for organised crime, further marginalise vulnerable people and justify the expansion of the security state.