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Legal action against criminals selling illicit cigarettes would be ramped up and overseen by Home Affairs under proposals from a parliamentary committee that warns rising tobacco excise rates are driving more smokers to the black market.
In a long-awaited report on the illicit tobacco market, the joint committee on law enforcement found there were growing problems with Australia's approach, in part driven by federal taxes that have more than doubled the price of cigarettes over the past seven years.
Illegal cigarettes are a growing problem for law agencies and the legal tobacco sector.
Tobacco excise is now the fourth-largest individual source of tax revenue for the federal government. Last financial year it raised almost $16 billion from smokers, although this was down on expectations due to the impact of the coronavirus recession.
The committee found higher excise rates had led to a reduction in the number of people smoking. But there was a "smaller, growing number" of people who were responding to high-price cigarettes by buying illegal products.
"This means that to some extent, the illicit tobacco market is caused by Australia's health policy towards tobacco," it found.
"Health policy settings have created a law enforcement problem – but this is a problem that should be addressed not by changing health policy settings, but rather by strengthening and re-focusing law enforcement approaches and techniques."
Illegal tobacco seizures have grown sharply over recent years, reaching a record high of 633 tonnes in 2018-19.
But the committee found law agencies faced an uphill battle as criminal organisations were estimated to make a profit if as few as one out of three shipping containers of illicit tobacco made its way into Australia. The potential profits made by crime gangs often outweighed the risks, which could include fines and prison, it said.
The committee recommended that all federal law enforcement arrangements for tobacco be centralised in the Home Affairs Department, moving some remaining powers out of the Health Department.
It called on Home Affairs to look at ways of using money from its proceeds of crime account to help fund federal and state operations targeting illicit tobacco.
As part of a national illicit tobacco strategy, it also recommended state and territory laws, policing and penalties be aligned after finding substantial differences between jurisdictions.
Imperial Brands Australasia's head of corporate and legal affairs, Kirsten Daggar-Nickson, said the federal government had to deal with the "illicit tobacco disaster", which was hurting legitimate businesses.
"The illicit tobacco problem in Australia is out of control with 20.7 per cent of the market now represented by illegal products, costing the federal government $3.2 billion in evaded duty, which instead is funnelled into criminal syndicates with links to serious crimes including human trafficking and terrorism," she said.
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