We were a brave country back in 2012 when we led the world by forcing the tobacco industry to adopt plain packaging with lurid health warnings and a big hike in tobacco prices to encourage smokers to kick that deadly habit. As predicted, it spawned a surge of illegal nicotine by way of the "underground economy "and now it is estimated that 14.5% of all tobacco smoked in Australia is an illicit product - and that the tax evaded is costing the treasury $ 1.35 Billion a year.
The bad news is getting worse ! The availability of smuggled tobacco has recently increased by thirty percent and it seems that it is freely available at many corner stores. In Sydney, the suburbs of Cabramatta, Campsie and Fairfield are hot spots, despite draconian fines for any outlet selling even a single packet of unlicensed tobacco.
Tobacco availability takes two forms. "Chop Chop " is loose shredded tobacco which requires the user to "roll their own " cigarette. This should please the health industry because hand rolled cigarettes are less in volume than factory cigarettes and have the added bonus of emitting less sidestream smoke. In the distant past, they were the preferred form of tobacco for those seeking low cost nicotine satisfaction.
What must alarm the tax man is that chop chop has a 53% grasp of the illicit tobacco market in this country - and it is mostly an Australian grown product. Tobacco has been a legitimate farm crop in Queensland and New South Wales and when " Big Tobacco " stopped buying because of slowing sales the farm industry sought other customers. What is reaching the public is a mix of home grown tobacco and imports smuggled in from Asia.
Cigarettes sold in packet form are entirely a product that has escaped detection by customs. The packets are emblazoned with brand logos and contain absolutely no health warnings. When a smoker pulls out a packet of cigarettes and they lack the dull colour demanded of the legitimate product, an observer can be sure that these are illegals. The prices varies, but is usually below $10 a packet, making it very attractive when compared to the legitimate price structure.
What is so attractive to the criminal industry is the ratio of risk in relation to profit. Get caught smuggling heroin and you spend a long term in prison, or in some cases you might even get the death penalty. There is also the social cost. The family of a narcotics smuggler could expect to be shunned by society, but somehow making a buck by bringing in tobacco brings an image of far distant days when getting luxury goods past the government men toting blunderbusses was the fare of schoolboy heroes.
The problem is - as our narcotics cops readily agree - that the sheer volume of trade in this twenty-first century makes a watertight border impossible. Only a small fraction of container traffic is inspected and busts are usually the result of tactical information gathered internally and overseas. The criminal gangs are finding that nicotine smuggling attracts less heat from the authorities - and it finds a willing customer base that delivers handsome profits with less risk.
No doubt this revelation will auger a blitz on the shops that trade in smuggled goods and the courts will make a few examples to deter others - and the farm industry may find themselves questioned about the disposal of whatever crops they have recently cultivated. There will be the usual pressure from the health industry to keep the tobacco fight relevant, but the main damage is being done to the bottom line over at treasury.
$1.35 billion would fill a lot of black holes in the budget, but getting it in is a rather different matter. That comes up against the first law of commerce - Supply and Demand. Wherever there is demand - supply is certain to follow, and in this case it is a matter of price that is the attraction. There is plenty of legal tobacco on offer - but the price deters people and they seek a cheaper product.
It simply gave the people who make their living supplying the drug trade an opportunity to diversify - and offer a safer item of merchandise !
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