Illicit tobacco market up 28% in Australia

Illegal tobacco consumption has jumped 28% in Australia in the last two years, according to a new report.

The Pricewaterhouse Coopers (PwC) study, Illegal tobacco: counting the cost of Australia’s black market, reports consumption of illegal tobacco has increased from 1.8m kg in 2007 to 2.3m kg in 2009.

More than 12% of all tobacco consumed in Australia is illegal and escapes excise, it says. And, it is costing the Federal Government more than $600m per year in lost revenue.

The report, commissioned by British American Tobacco Australia (BATA), says growth in illegal trade is being driven by an increased in smuggled counterfeit and contrabrand cigarettes. This represents a shift in the black market from locally produced loose tobacco. And it provides a new challenge for government agencies in combating the activities of organised crime.

The report also found:

• The number and breadth of illegal tobacco suppliers has increased, with tobacconists and local markets the major distributors of illegal products
• The majority of the illegal tobacco trade is on Australia’s east coast, in particular New South Wales and Victoria
• More than 50% of smokers are aware of illegal tobacco and half of them purchase it
• Price remains a key driver of decisions to use illegal tobacco products
• Other regulatory measures, such as retail display bans and generic packaging, could result in increased consumption of illegal tobacco

The report highlights the key impacts of illegal tobacco: “The use of illegal tobacco results in foregone government revenue, adverse public health impacts and is believed to have links with other unlawful activity,” it says.

PwC partner Scott Lennon said: “Cheaper prices was the most common reason more than three quarters (77%) of users smoke unbranded tobacco.”

BATA head of communications, Louise Warburton, said partnership and sharing information with government agencies is the key in working to address this issue.

“Agencies are doing a good job in clamping down on the supply of illegal product, yet clearly demand remains high, and with more than 70% of the cost of a cigarette going to the Federal Government in excise, it is no wonder criminals are turning to illegal tobacco to make a profit.”

Warburton also highlighted the impact of tobacco control measures on illegal tobacco.

“When regulatory measures are introduced around tobacco, there needs to be great appreciation of the unintended consequences and ways of mitigating these,” she said.

To read the full report visit www.bata.com.au