International crime groups will become the largest supplier of tobacco in Australia, surpassing legal, regulated sales by next year, a new report has found.
The study, conducted by Tulipwood and commissioned by the Australian Association of Convenience Stores (AACS), predicts illicit tobacco consumption will exceed that of government-regulated products by 2026-27.
Theo Foukkare, CEO of AACS, and small business owners, are urging immediate action to curb the black market, which they say is being fuelled by rising excise taxes.
The report estimates that freezing excise increases, legalising regulated vaping products, and cracking down on illegal operators could generate an additional $18.6 billion in excise revenue over four years from 2025-26, as well as $2.3 billion in additional GST revenue.
“The definition of insanity is doing the same thing over and over and expecting a different result.
“This new report proves that year-on-year tobacco excise increases have driven smokers right into the grip of crime groups who are selling illegal, unregulated and dangerous tobacco and vaping products.”
Foukkare criticised the Federal Government’s approach, saying it has failed to address the issue and is exposing small business owners and workers to increasing risks.
“This is a national crisis. As the excise goes up, crime is skyrocketing, the rate of smokers quitting has flatlined, and criminals continue to pocket billions in tax-free money.
“Small business owners and their staff are terrified as shops continue to be firebombed by criminals muscling in on vulnerable owners. The Federal Government needs to admit it has failed to take this crisis seriously and fix this now.”
AACS is calling on both major parties to commit to an immediate freeze on excise increases and reassess existing policies. The group is also advocating for the legalisation and regulation of vaping products, similar to approaches in the UK, Canada, and New Zealand.
“We need a policy that ensures smokers are using legal, regulated and taxed products, with revenue going where it can be used for the good of Australia – instead of funding international crime groups.”
Foukkare argued that the current ban on vapes has been ineffective, with unregulated products flooding the market.
“Banning vapes hasn’t worked – instead, vapes are illegally imported here from China, with no regulation, no taxation, and no idea what insidious chemicals are even in them. They are everywhere.”
The report also projects a decline in tobacco tax revenue from $8.3 billion in 2025-26 to $7.6 billion in 2028-29, while illicit tobacco consumption is expected to rise from 3.3 million kilograms per year to 4.3 million kilograms.
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