Illicit tobacco: A growing problem for Retailers

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The smuggling and sale of illicit tobacco across Australia has been hurting retailers and small businesses for many years. The size and scale of the illicit market, alongside the involvement and damage caused by organised criminals, is often less known. MGA will continue to highlight the damage being done to retailers from an insidious trade growing in size. MGA will demonstrate to Federal, State and Territory policymakers that retailers need better protection through legislative change and cooperative enforcement measures.

Illicit Tobacco Consumption and Police Seizures Reveal Growing Problem

The size of Australia’s illicit tobacco market has grown substantially in recent years. According to KPMG, one in every six cigarettes smoked in Australia comes from an illegal source – one of the highest levels ever recorded1 .

Between 2012 and 2019, illicit tobacco consumption in Australia nearly doubled from 11.5% to 20.7%2 , resulting in billions of taxes being lost each year. KPMG’s most recent estimates suggest the consumption of illicit tobacco resulted in the Commonwealth Government losing $2.9 billion in tobacco taxes last year alone3 .

Australian authorities and Australian Border Force (ABF) officers have tackled the problem over many years, but given illicit tobacco consumption is increasing, it is important adequate resources and cooperative measures are taken by all levels of government. Last year, the ABF seized 512 million illicit cigarettes, a 36 per cent increase from the previous year4 – and 748 tonnes of loose-leaf illicit tobacco, compared to 167 tonnes the previous year. With tobacco seizures doubling in the last 12 months, illicit tobacco remains a key priority for the ABF, indicating how much is flooding the country.

Media Coverage Highlights Shocking Scale

Media coverage of illicit tobacco seizures demonstrates the problem is not isolated to one state or territory. Large-scale seizures have taken place across Western Australia, South Australia, Victoria, Queensland and New South Wales over the last 12 months. This is a national problem that requires national solutions. In August 2021, a huge haul of illicit tobacco was intercepted by authorities at the Queensland/New South Wales border checkpoint at Coolangatta. A semi-trailer with an estimated $600,000 worth of illicit tobacco was seized, headlining local papers. “As well as funding organised crime syndicates, the avoidance of tobacco duty means the community misses out on revenue that contributes to infrastructure and other services,” Acting Detective Inspector Galpin, August 2021. Earlier in 2021, the multi-agency Illicit Tobacco Taskforce uncovered more than 40 hectares of tobacco crops, growing on properties either side of the Victoria-New South Wales border. The scale of the seizures ensured coverage across the ABC and the Nine Network. The tobacco seized by authorities had a potential value of $84.3 million5 . “That’s the biggest crop we have discovered to date.” Australian Border Force Commander Greg Linsdell, head of the Illicit Tobacco Taskforce, March 2021.

A special investigation from Simon Bouda at A Current Affair late last year, revealed the size and scale of the illicit tobacco market and the trade’s dangerous nature. In the program authorities seized enormous shipping containers with 13 million illicit cigarettes inside, worth an estimated $13 million on the street6 .

This ongoing coverage has prompted the Minister for Home Affairs, Karen Andrews, to address the issue publicly. Appearing on radio recently, Minister Andrews made commitments the Federal Government would continue to tackle illicit tobacco and dedicate resources to disrupting illicit trade. Opportunities for New Policies to Tackle Illicit Tobacco

It is imperative for the Commonwealth and State Governments to take a more co-operative approach and work together to disrupt all levels of the illicit tobacco supply chain. While the ABF and ATO seize illicit tobacco at the border and destroy locally grown crops, there remains a lack of retail enforcement, with street level sales continuing to go largely unchecked. Unfortunately, in many states, local police do not have the

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correct powers and penalties at their disposal to shut down rogue traders.

The Commonwealth Parliamentary Joint Committee on Law Enforcement (PJCLE) into Illicit Tobacco released its final report in November 2020. The report, with information sourced from public hearings, revealed the size and scale of the illicit tobacco market, identified those affected by it, and presented solutions to disrupt and dismantle the market.

The Committee’s report outlined a series of recommendations on how State and Federal Governments tackle the illicit tobacco problem in a holistic way. MGA is fully supportive. Some recommendations include: • Create a National Illicit Tobacco strategy led by the Commonwealth

Government, supported by State and Territory law enforcement agencies – this would foster greater co-operation between all levels of law enforcement and provide clear roles and responsibilities for participating agencies. • Close gaps in state and territory laws, aligning them with Commonwealth offences and penalties – this would provide local police with the powers they need to enter, search and shut down shops selling illicit tobacco. • Introduce tougher on-the-spot fines for selling illicit tobacco – a quick and effective means of penalising those caught doing the wrong thing, especially if the fines are several thousand dollars.

A response to the PJCLE’s report is expected from the Government in late 2021.

MGA Advocacy and how you can help

MGA continues to hold productive conversations with all levels of Government regarding the need to implement these measures promptly, to protect retailers and businesses affected by the illicit tobacco trade.

Retailers and businesses owners can support MGA’s campaign to improve illicit tobacco enforcement by contacting their local MP. Hearing from members of the local community about how illicit tobacco is impacting their business is an effective way of keeping the problem ‘front of mind’ for Government to encourage decisions makers to act quickly.

MGA has partnered with the Australian Coalition Against Illicit Tobacco (ACAIT) to make it easy for you to contact your local MP and key Ministers.

Scan the QR code below and enter your name, email address and postcode details to automatically send an email calling for urgent action on illicit tobacco to your local MP and key State and Federal Ministers who have responsibility for health, law enforcement, finance, and small business issues.

By contacting your local MP on behalf of your business, you help to raise awareness of this issue and support MGA’s push for national changes to effectively tackle illicit tobacco.

Reporting

If you see or hear of illicit tobacco being sold in your community, it is important you report to the relevant authorities.

You can make a report nationally, via the ABF’s Border Watch portal https://www. homeaffairs.gov.au/help-and-support/ departmental-forms/online-forms/ border-watch

If you prefer, MGA will report these matters on your behalf. Please email details of what you have witnessed to George Kovits at george.kovits@mga. asn.au.

References

1 KPMG. Illicit tobacco in Australia 2020. Full year report. 2021.

2 KPMG Illicit tobacco in Australia 2020. Full year report. 2021.

3 KPMG. Illicit tobacco in Australia 2020. Full year report. 2021.

4 Sydney Morning Herald. ‘Criminal groups farm illicit tobacco as authorities confiscate imports.’ July 2021. https://www.smh.com. au/national/nsw/criminal-groupsfarm-illicit-tobacco-as-authoritiesconfiscate-imports-20210719-p58avl. html

5 Nine Network, 9 March 2021 https:// www.9news.com.au/national/policebust-illegal-tobacco-crops-worth-84million-victoria-nsw/7cb5adc3-547c4095-a4a3-e6fb78b92fdc

6 A Current Affair, The illegal trade funding human trafficking and terrorism. https://9now.nine.com.au/ a-current-affair/the-illegal-importsallegedly-sold-at-local-aussie-storesseized-by-police/46284bb8-ed5f482b-85da-b0b6efe0e921