The Melbourne tobacco war safe-zone where violent gangs are policing themselves

The Rise of Illicit Tobacco in Australia: A Growing Concern

In recent years, Australia has faced a significant challenge with the rise of illicit tobacco, a problem that has spiralled out of control despite efforts to tackle it. In 2018, the federal government established the Illicit Tobacco Taskforce (ITTF) to address the growing infiltration of organised crime syndicates into the black-market tobacco trade. However, the situation has deteriorated further, with the price of a pack of illicit cigarettes dropping by 20% in just over a month to $14—a level not seen since 2010. Today, a legal pack of cigarettes costs $38, making the black-market alternative increasingly attractive to consumers. This pricing disparity has led to a surge in illegal tobacco sales, with Manchester emerging as one of the most popular brands, both legally and illegally, across the country.

The surge in illicit tobacco sales has been fueled by the ready availability of black-market products in specialty tobacco shops, convenience stores, petrol stations, and supermarkets. According to covert surveys, Manchester cigarettes are being sold in more than 1,200 retail outlets across the state. This widespread availability raises questions about the effectiveness of current enforcement strategies. Experts argue that the problem requires a comprehensive overhaul of Australia’s tax system and law enforcement approach.

The Role of Taxes in the Illicit Tobacco Crisis

The high cost of legal cigarettes, driven by hefty taxes, has played a significant role in the rise of the black market. Criminologist James Martin, an expert in black-market economics, has warned that the current tax system is inadvertently fueling the illicit trade. Martin, who predicted the surge in black-market tobacco six years ago, argues that the combination of high demand for nicotine and the ready availability of cheap, illegal cigarettes has created a perfect storm. He likens the situation to a "war on drugs," where increased enforcement and penalties have failed to curb supply or demand. Instead, these measures have pushed consumers into the black market, legitimising the trade and enriching organised crime syndicates.

Martin contends that the government’s approach to tobacco control is based on a flawed assumption that criminals will abandon the trade in response to stricter penalties. In reality, criminals adapt their strategies to maintain supply, leading to a cycle of violence and lawlessness. He points to declining drug prices and rising drug use as evidence that increased enforcement is not yielding the desired results. The solution, according to Martin, lies in a more nuanced approach that addresses the root causes of the problem, including the high cost of legal tobacco products.

The Case for Slashing Taxes on Cigarettes

Security analysts, criminologists, and industry insiders argue that slashing the taxes on cigarettes could be a crucial step in combating the illicit tobacco trade. Dr. John Coyne, a former officer with the Australian Federal Police and head of strategic policing and law enforcement at the Australian Strategic Policy Institute, supports this approach. He acknowledges that higher taxes were effective in reducing smoking rates in the past, but the current context has changed. Instead of discouraging smoking, rising costs are driving consumers to the black market, legitimising the illegal trade.

Coyne and other experts propose that lowering taxes could undercut the profits of organised crime syndicates and reduce the demand for black-market cigarettes. This approach aligns with strategies adopted in other countries, such as Sweden, where less harmful nicotine products like vapes and pouches have been promoted to help smokers transition away from traditional cigarettes. Such a strategy could simultaneously reduce smoking rates and weaken the black-market trade.

The Failed Promise of Enforcement-Only Strategies

The failure of enforcement-only strategies to curb the illicit tobacco trade has been evident for years. Despite record-breaking seizures and increased penalties, the supply of black-market cigarettes remains unabated. Martin draws a stark analogy to the "war on drugs," noting that the focus on enforcement has not translated into meaningful results. Instead, it has led to a culture of lawlessness, with organised crime syndicates adapting their operations to maintain supply and evade law enforcement.

The situation in Victoria exemplifies the shortcomings of this approach. The state has been slow to implement a licensing regime for tobacco sales, with infighting over operational details delaying its enforcement. Meanwhile, local councils have proven ineffective in regulating tobacco retailers, issuing only six fines and prosecuting no offenders in 2022-23. The rise of specialty tobacco shops—now estimated at 1,300—has further exacerbated the problem. Experts warn that the government’s failure to act swiftly has allowed the black market to flourish.

The Black Market Adaptation and Future Threats

The organised crime groups involved in the illicit tobacco trade are already planning for the next phase of their operations. According to underworld sources, criminals have commissioned the development of an app that would allow consumers to order black-market cigarettes and have them delivered directly to their homes or businesses. This "UberEats for illicit smokes" model poses a new challenge for law enforcement, as it would bypass traditional retail channels and make illegal cigarettes even more accessible.

The development of such an app is currently hindered by the need for a payment system that does not ask too many questions about the nature of the transactions. However, once this hurdle is overcome, the app could revolutionise the black-market tobacco trade, making it as easy to purchase illegal cigarettes as ordering a pizza or a bottle of alcohol. This scenario highlights the need for urgent action to address the root causes of the problem and prevent the black market from expanding further.

The Road Ahead: Licensing and Regulatory Reforms

While the Victorian government has finally introduced "crackdown legislation" to tackle the illicit tobacco trade, the implementation of these measures has been slow and inadequate. The licensing regime for tobacco sales, which could help push organised crime out of the market, is still in the planning phase. Businesses will have six months to apply for a licence once the scheme is introduced, after which enforcement will begin. Penalties for selling illicit tobacco will be significant, with fines of up to $350,000 for individuals and $1.7 million for corporations.

The delays in implementing these reforms have drawn criticism from law enforcement agencies, which argue that the government’s approach is "too little, too late." In contrast, other states like South Australia have acted more swiftly, closing shops and sending a strong message to criminals. The Victorian government’s reliance on consultation and gradual implementation has allowed the black market to thrive, while organised crime syndicates continue to exploit the system. The situation underscores the need for a more urgent and comprehensive response to the illicit tobacco crisis.

In conclusion, the rise of illicit tobacco in Australia is a multifaceted problem that requires a bold and innovative solution. The current approach, which relies heavily on enforcement, has failed to curb the black-market trade and has instead emboldened organised crime. Experts argue that slashing taxes on legal cigarettes and promoting less harmful nicotine products could help reduce demand for black-market tobacco and weaken the grip of criminals. At the same time, the introduction of a robust licensing regime and stronger regulatory measures are essential to prevent the resurgence of the black market. The government must act swiftly to prevent the situation from spiralling further out of control and to protect public health and safety.