Australian Tobacco Tax Revenue Halved After Five Years

According to Sky News on September 23, the Australian federal government is facing its lowest tobacco tax revenue in years, mainly due to an increase in illegal cigarette sales.

Core highlights:

Fiscal impact: Australia’s tobacco tax revenue continues to decline, expected to drop to approximately AUD 7.4 billion (approximately USD 4.9 billion) by 2025-2026, a significant decrease from the peak of AUD 16.3 billion (approximately USD 10.8 billion) in 2019-2020; The value of the illegal tobacco market in 2022-2023 exceeds AUD 6 billion (approximately USD 4 billion), with vapes accounting for the highest proportion.
Public health risks: The proliferation of illegal cigarettes has pushed Australia’s smoking rate to a new high in over a decade, and the younger generation may become the first group to smoke on a large scale in decades; Long term smokers claim that the price of illegal cigarettes has dropped from 60-65 Australian dollars per pack (about 40-43 US dollars) through regular channels to 15-20 Australian dollars per pack (about 10-13 US dollars). Low prices can easily trigger smoking behavior, and illegal tobacco is not regulated. Among them, vape is the most prominent product field.
Breeding of organized crime: Organized criminal groups profit approximately AUD 10 billion (USD 6.6 billion) annually from illegal tobacco trade; Driven by the demand in the underground tobacco market, there has been an increase in criminal activities such as attacking competitor tobacco shops and violently robbing gas stations, which undermines social security.
Enforcement interception effect: In the past year, only 285000 illegal cigarettes were intercepted in the Australian Capital Territory, the vast majority of which were electronic cigarettes. However, illegal tobacco still accounts for half of the 2.7 million smokers in the national market.

The medical community warns that the proliferation of illegal cigarettes in recent years has led to smoking levels reaching heights not seen in over a decade, especially vapes. The Australian Medical Association pointed out that unregulated tobacco on the streets has significantly increased, and the younger generation is likely to become the first group to smoke on a large scale in decades. Kerrie Aust, the President of the Australian Capital Territory Association, stated that many patients have told doctors that they can easily find low-priced smuggled cigarettes. A long-term smoker mentioned, “I used to buy a pack for 60 to 65 Australian dollars (about 40-43 US dollars), but now it only costs 15 to 20 Australian dollars (about 10-13 US dollars)

According to data from border law enforcement agencies, in the past year alone, the Australian Capital Territory has intercepted over 285000 cigarettes, including a large number of vape products. However, despite this, informal tobacco still accounts for half of the country’s 2.7 million smokers market.
Illegal tobacco not only leads to an increase in smoking rates, but also provides considerable income for organized crime. According to the latest data, criminal groups obtain approximately AUD 10 billion (approximately USD 6.6 billion) annually from it. Due to high tobacco taxes and bans on flavored cigarettes, market demand has shifted towards underground trading, leading to a chain reaction that includes criminal activities such as attacking competitor tobacco shops and violently robbing gas stations.

Although the federal government plans to generate over AUD 7 billion (approximately USD 4.6 billion) in revenue through tobacco taxes in this fiscal year’s budget, tobacco tax revenue has decreased by half since 2019. Dr. Oster warns that tobacco smuggling poses a threat to public health. Especially for young people, smoking has significant long-term health impacts such as cancer and heart disease, and we cannot let smoking rates rise again.

It seems that vapes do have a huge impact on a country’s tobacco tax, and they seriously impact government tax revenue.
Due to this reason, different countries have introduced different laws and regulations to regulate vape products.