Illicit tobacco accounts for 19.3% of tobacco consumption in Australia

The Australian government is losing billions in excise tax as illicit tobacco consumption hits 2.2 million kilograms, subsidising dangerous criminal enterprises, KPMG UK’s latest ‘Illicit Tobacco in Australia’ research report has revealed. The report found illicit tobacco now accounts for 19.3% of all tobacco consumed in Australia. If the 2,242 tonnes of illicit tobacco had been consumed legally, it would have generated an additional $3.4bn in tax revenue.

Who is behind illicit tobacco trade in Australia?

Law enforcement authorities have identified that the Aussie illicit tobacco trade is underpinned by criminal syndicates with links to the cultivation, importation and supply of illicit drugs, illegal weapons and terrorism, with profits used to fund other illegal activities across Australia.

The rise in illegal tobacco consumption occurred even as the Australian Border Force and ATO increased illicit seizures by 120% in the last year. Illicit tobacco harms legitimate operators, many of which are small and family businesses who sell regulated, legal and taxed products.

The Aussie Gov’t, and the people, are also a victim, losing out on billions in tax revenue which could have been spent on delivering essential public services and improving infrastructure.

Why is illicit tobacco picking traction?

With increased cost of living pressure, cheaper illicit products have become more tempting, with criminal enterprises exploiting the high tobacco excise price difference between legal and illegal products, denying revenue to gov’t and delivering easy profits to organised crime.

This pervasive black market also undermines Australia’s tobacco harm reduction agenda, exposing consumers to products which do not comply with regulations such as plain packaging and advertising bans. The criminals who deal in illicit tobacco respect no product standards, including no adherence to banned ingredient mandates and sales to juveniles.

Whilst the report is specifically focused on illicit tobacco, the rapid growth in the supply and sale of illicit disposable vaping products in Australia it is likely that these same criminal elements are leveraging their supply routes to bring illegal vaping products into the country.

This is a problem that requires a collective solution. Delivering on the goal of reducing the impact of smoking and youth vaping in the community cannot be achieved without governments at all levels working together to develop an enforcement strategy that tightens controls across the supply chain and severely penalises those involved in illicit trade.

To do this, law enforcement needs to be equipped with resources to tackle illicit tobacco, dismantle organised criminal networks and create an environment that is hostile to the fraud.

What were the survey’s key findings?

Here are key findings from the report:

  • KPMG’s research found that illicit tobacco accounts for 19.3% of tobacco consumed in Australia in 2021, up from 16.9% just one year earlier.
  • Illicit tobacco consumed in 2021 constitutes 2,242 tonnes of illicit tobacco, which if consumed legally, would represent an estimated excise value of $3.4bn. This represented a 0.8% increase in the volume of illicit consumption in Australia between 2020 and 2021
  • Unbranded tobacco saw an increase of 36%, which accounted for 68.6% of illicit consumption in 2021. This increase in unbranded tobacco was partially offset by a 35.5% decline in the consumption of illicit manufactured cigarettes.
  • The total level of tobacco consumed in Australia was estimated at 11,639 tonnes in 2021, a decline in volume by 11.4% from 2020.
  • Total combined illicit tobacco seizures from the Australian Border Force and Australian Taxation Office increased by 120% in the last year, representing 1,357 tonnes of tobacco.
  • Indexed tobacco prices have risen 435% more than disposable income since 2008.

View the Illicit Tobacco in Australia 2021 Report here.