The Australian Coalition has unveiled a plan to cut tobacco excise by 80%, a move aimed at dismantling the burgeoning illicit tobacco market. This proposal, detailed by Angus Taylor's Coalition, would reduce the excise component on a packet of 20 cigarettes from approximately $30 to just over $6.
The plan also includes the legalization and regulation of vapes and nicotine pouches for adults, alongside $200 million for law enforcement to target illegal trade and $60 million for a public awareness campaign. The policy is slated for review after two years.
The Parliamentary Budget Office estimates this measure could generate an additional $8 billion over four years and improve the budget bottom line by over $20 billion in a decade. Proponents argue that the current high excise tax has driven a significant portion of the tobacco market underground, with over half of tobacco consumed in Australia last year reportedly being illegal. When illicit vapes and pouches are included, the black market is estimated to account for 80% of nicotine consumption.
Economist Richard Holden, former deputy chief medical officer Nick Coatsworth, and former AFP and Border Force investigator Rohan Pike have supported the Coalition's proposal. They argue in a letter to Prime Minister Anthony Albanese that the growth of the illicit tobacco market is internationally unique, contributing to criminal violence and undermining public health systems. They contend that past excise increases have fueled the profitability of illegal tobacco.
"The only way to get illicit tobacco out of the market is to kill their business model," Holden stated. "That requires a dramatic cut in excise."
Health Minister Mark Butler, however, has dismissed the plan, arguing that even eliminating the excise entirely would not make legal cigarettes cheaper than illegal ones. Tanya Plibersek, the Minister, has criticized the proposal, stating it "will kill people" and would lead to increased smoking and vaping rates.
Critics of Plibersek's response point to the escalating violence associated with the black market, including a recent firebombing incident on the same day she voiced her concerns. They argue that her stance ignores the current public health damage and criminal activity stemming from the status quo.
The Coalition's plan mirrors a proposal from One Nation to cut tobacco excise by 75%. The Coalition's additional five percent cut is seen by some as political one-upmanship, but the overall strategy focuses on narrowing the price gap between legal and illegal products to encourage consumers back to lawful retailers, coupled with enhanced law enforcement.
The policy's inclusion of a two-year review is highlighted as crucial for assessing its impact on smoking rates, youth nicotine use, illicit market share, revenue, and tobacco-related crime. Supporters suggest that while a significant excise cut is risky, it may be a necessary step to shift from a collapsing illicit market to a regulated legal one, offering safer alternatives and greater government control.