Australia’s Tobacco Tax Dilemma: Protecting Health Without Funding Crime

Criminal Enterprises on Your Corner

This isn’t just a local problem. In suburban shopping strips across Australia, what appear to be ordinary tobacconists are actually sophisticated conduits for criminal networks. Victoria Police confirms more than 125 tobacco shop firebombings occurred in just 18 months, with some shopkeepers now sleeping at their premises for protection.

In Queensland, authorities report illicit tobacco now funds expanding methamphetamine distribution and weapons trafficking across the Gold Coast and Logan corridor. Similar issues are being reported in other states as organised crime groups vie for control of the illicit market.

Nationwide, cash-heavy tobacconists increasingly use unregulated ATMs — with AUSTRAC identifying 137 high-risk machines in tobacco shops last year, enabling $28 million in suspicious transactions.

Former Australian Border Force Commissioner Roman Quaedvlieg’s warning rings truer than ever: “Organised crime has identified tobacco as low-risk, high-reward contraband.” These profits don’t just buy luxury cars; they also bankroll drug shipments and corrupt officials, perpetuating cycles of violence that erode community safety.

The Unintended Tax Consequences

In 2025, the average price of a legal cigarette pack in Australia ranges from $40 to $50, with some premium brands exceeding $50 — pushing the country toward a clear economic tipping point.

Tobacco excise continues to climb, with rates rising twice yearly through indexation linked to Average Weekly Ordinary Time Earnings (AWOTE). Since September 2023, an additional 5% annual hike has been applied and is scheduled to continue until at least the end of 2025. Collectively, these measures have driven a steep cumulative increase since 2019.

Despite the tax hikes, smoking remains deeply entrenched in vulnerable communities. In Western Australia’s Kimberley region, smoking prevalence is roughly double the state average at about 20%. In Queensland’s Indigenous communities, rates are considerably higher—up to 54% in remote areas and around 36% overall—more than triple the national daily smoking rate of 10.6%.

Meanwhile, tobacco excise revenue has significantly declined. Federal budget papers project a fall from $16.3 billion in 2019–20 to approximately $7.4 billion in 2024–25—a yearly shortfall of about $6.9 billion, equivalent to funding 15 major public hospitals.

Instead of funding health or infrastructure, much of this missing revenue now supports organised crime through the illicit tobacco trade. The black market accounts for approximately 14–18% of total tobacco sales, valued between $3 billion and $6 billion annually. Its rapid growth is placing significant strain on law enforcement and severely impacting legitimate retailers.

Reconciling Health Goals with Criminal Realities

This is not an argument against tobacco control. The World Health Organization (WHO) champions excise taxes as one of the most effective tools to reduce smoking. However, the WHO also warns that without strong enforcement, high taxes may inadvertently fuel black market growth.

This is precisely what has happened in Australia. By pushing tobacco prices beyond what vulnerable consumers can afford—and beyond what authorities can realistically enforce—the country has unintentionally created ideal conditions for organised crime. This reality is unfolding on the streets: in Victoria alone, Taskforce Lunar has arrested over 100 individuals for tobacco-related offences, signaling that enforcement agencies are under pressure but actively fighting back.

Meanwhile, public health advocates rightly express concern over any pause in excise increases. However, those same health goals are undermined by criminal networks flooding the market with untaxed, unregulated tobacco sold at roughly half the legal price.

The result is a policy paradox: smoking has become more expensive, yet simultaneously more accessible through illegal channels—undermining both public health targets and government revenues.

Global Lessons for Australian Solutions

Other nations demonstrate balanced approaches from which Australia can learn. The United Kingdom maintains high tobacco taxes while keeping illicit trade to about 13.8%, thanks to dedicated HM Revenue & Customs (HMRC) enforcement squads. In France, Customs has increased seizures by 40% through the use of AI-powered container scanning technology.

Australia also has pockets of success at the state level. In South Australia, illegal sales have declined through warrantless inspections, while in New South Wales, the cross-agency Illicit Tobacco Taskforce has conducted significant busts. These examples demonstrate that robust enforcement is possible, though they also highlight the uneven nature of the current response.

Despite Queensland’s 2023 licensing scheme, which closed 47 illegal stores, the state still faces significant challenges. At ports such as Townsville, enforcement struggles to contain the illicit flow. Torres Strait smuggling routes now account for 40% of Queensland’s illegal tobacco. Nationally, Border Force physically inspects fewer than 1% of shipping containers, although many more are digitally screened.

While much attention has focused on Queensland, this is undeniably a national crisis. From the ‘tough new laws’ in New South Wales to major busts in Western Australia and Tasmania, and dedicated operations in the Northern Territory, each state is confronting the same adversary. Criminal syndicates do not respect borders. What Australia faces is a coordinated, nationwide network—not merely a series of local skirmishes.

A Balanced Path Forward

We can protect public health without bankrolling criminals, but it will take a coordinated national effort. The following steps provide a practical way forward:

1. Pause and revise excise increases for 24 months to stabilise the market while enforcement capabilities are expanded.
2. Scale up proven enforcement models nationwide — including SA’s warrantless inspections, QLD’s Taskforce Victor, and NSW’s new joint taskforce.
3. Establish permanent federal taskforces specifically targeting the tobacco–organised crime nexus.
4. Deploy advanced scanning and detection technologies at key smuggling points like the Torres Strait.
5. Fund culturally tailored cessation programmes in high-risk communities such as Cape York and Cherbourg, where smoking rates remain critically high.

Reforms must focus on choke points in the system. In May 2025, Queensland authorities seized 20 tonnes of illicit tobacco near Cairns — proof that focused action works.

Recent wins also show what’s possible with political will. In Western Australia, a $10 million criminal network was dismantled. In Tasmania, significant seizures have reinforced the message: jurisdictional boundaries can be overcome with national cooperation.