Recently, the joint Australia-ASEAN Taskforce on Illicit Tobacco seized over 19 million illegal cigarettes bound for our Indo-Pacific region. The seizure follows multiple police raids over a single month in Malaysia that seized over $9.32 million AUD of contraband cigarettes, and raids across Victoria and Queensland that collectively seized over 400,000 illegal cigarettes and 4.5 tons of loose tobacco.
While the ongoing raids may be hailed a success by law enforcement, they speak to an ever-growing and burgeoning multibillion-dollar trade in our region that deprives governments of billions in revenue for state-funded services.
In Australia alone, $2.2 million worth of illicit tobacco was consumed in 2020, costing the government $2.9 billion in lost excise. Illegal tobacco accounts for over 20% of all tobacco consumed in Australia, twice the average for high-income countries. The global trade is so lucrative that even some legal tobacco companies have historically been complicit in it.
Australia is home to some of the world’s most expensive cigarette packets, buoyed by annual excise hikes of 12.5% between 2013 and 2020. These regressive taxes, which disproportionately impact poor smokers who are more likely to struggle to quit or to smoke as relief from stress or mental illness, help offset the tax burden that the rest of us shoulder. There’s even economic evidence that, contrary to claims from public health bureaucrats, smokers (morbidly) constitute a net saving for public healthcare and social services systems since they tend to live less long.
As an adult, you should be able to put what you want into your own body and one can hardly blame a poor smoker who doesn’t want to lose a significant chunk of his family income to the government for approaching the dude selling chop-chop outside a suburban convenience store. It’s no surprise, then, that the Commonwealth’s tobacco tax takings are declining despite excise hikes as consumption of legal, taxed products falls. When cigarette prices rise faster than smokers’ incomes, they begin to seek cheaper options and some turn to the black market.
But the same criminal gangs involved in illicit tobacco also funnel their profits into other illegal activities in our region. These include terrorism, human trafficking and robberies. And their profit margins are bolstered by the price of legal products. However, unlike legal goods, contraband tobacco isn’t subject to health warnings, or age verification rules. That’s why studies in Canada and Australia link illicit tobacco availability to high youth smoking rates. And while both illegal and legal tobacco is dangerous to health and causes the premature deaths of millions of smokers globally each year, the health risks of illegal products are even greater since the same product or ingredient checks don’t apply to them. Seized counterfeit cigarettes have been found to contain dead flies, maggots, mold, insect eggs and even traces of human waste. They can also contain up to 500% more cadmium, 600% more lead, 133% more carbon monoxide and 160% more tar than legal products.
It doesn’t need to be this way. In Australia and other countries in the region, reduced-harm tobacco alternatives, such as e-cigarette liquids containing nicotine, can’t be easily purchased even though more harmful combustible cigarettes are widely available. This is even though e-cigarettes containing nicotine are approximately 95% less harmful than tobacco cigarettes and are recommended to smokers struggling to quit by British doctors.
This status quo could explain why countries where they can be purchased as consumer goods, such as the United States and UK, have seen quit smoking rates fall far faster than they’ve fallen in Australia in recent years. These devices are even significantly more effective at facilitating quit attempts than nicotine patches and gums that are sold over the counter. And yet, instead of making these products more widely available to smokers so tax increases can drive them away from both legal and illegal combustible tobacco products, our government and bureaucratic agencies are only tightening regulations around them and the stores that sell even vapes that aren’t loaded with nicotine.
Those who prefer more punitive and prohibitionist approaches to tackling black markets might argue that harsher penalties and stricter law enforcement are the solution. This thinking drove Australia to increase penalties for tobacco smuggling, and to form a special taskforce to tackle illicit tobacco under the Australian Border Force.
No doubt, the taskforce has had some success through inter-agency sharing of intelligence information on tobacco consignments to support disruption, targeting and enforcement, even with other nations. But its effectiveness is ultimately limited, especially given the inability of other nations in our region to deploy similar resources against the syndicates involved. For instance, anti-smuggling enforcement in Malaysia has been historically lax and its long coastlines facilitate the transfer of illegal shipments from neighbouring countries like Indonesia.
Policymakers in our region must look beyond punitive policing if they want to avoid propping up an illegal trade that has wider-reaching consequences than simply supporting the habits of smokers. Well-intentioned albeit misguided policies, like excessive and regressive tobacco taxation and a prohibitionist approach to reduced harm alternatives, offer criminals a free hit.
Satya Marar is a policy professional who works from either Sydney or Washington DC (viruses and governments permitting) and author of Tobacco Harm Reduction: A formula to save 500,000 Australian lives.
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