Australia sees growing trade in illegal tobacco

AUSTRALIA - Australia is facing a growing trade in illegal tobacco by international smuggling syndicates, with soaring retail prices leading to a surge in contraband from Asia and the Middle East.

Cigarette prices in Australia are the second-highest in the world, after Norway, with packets costing about 60 per cent more than in Singapore. A packet of Marlboro 20s in Australia costs about A$16 (S$18.80), compared with about A$10 in Singapore, according to a KPMG report released last week.

The high prices - caused by high tobacco taxes - have created a market for smugglers, with several recent busts netting tens of millions of cigarettes from Indonesia, China and the Middle East. In some areas of large Australian cities, such as Sydney or Melbourne, cheap illegal cigarettes are widely available in shops or on the street.

About 20 per cent of Australian adults smoke.

The Australian Crime Commission, a federal agency that fights organised crime, has warned that the country's illegal tobacco market is "perceived by organised crime groups as a low-risk, high-profit activity". It says the proceeds are frequently used to support other organised crime activities such as drugs and arms trading.

"They see it as a market in which large profits can be made with minimal risk of detection or significant penalties," the commission said in its 2013 crime report.

The federal Customs agency said last year that 924 tonnes of illegal tobacco and 322 million illicit cigarettes were seized between 2008 and last year, mainly from China and Indonesia.

Last month, the authorities busted one of the biggest syndicates to target the country, and seized 80 million cigarettes and more than 70 tonnes of tobacco in Melbourne.

The illegal cigarettes came mainly from Indonesia and the United Arab Emirates and were hidden in food packets such as noodles - as well as other cigarette packets. Police said the haul would have avoided A$67 million in taxes.

Big tobacco firms say the growing illicit trade has been fuelled by successive tax hikes and the introduction of plain packaging laws last December, which require all cigarettes to be sold in drab olive green packs with large health warnings. The tax per cigarette is about 60 per cent of the price, or 35 Australian cents a cigarette, up from 22 cents a decade ago.

The previous Labor government was set to increase the taxes by a further 60 per cent to raise A$5 billion over the next four years. The new Abbott government has not yet declared whether it will do so. The extra tax would make Australia's cigarettes the world's costliest.

Over the years, smugglers have moved away from importing unbranded loose-leaf tobacco - or "chop chop" - to packaged cigarettes.

They include known brands, counterfeits or cheap packets that are unavailable in Australia.

The KPMG report, commissioned by tobacco firms and released last Monday, found 13.3 per cent of tobacco smoked in Australia last year was illegal, up from 11.8 per cent the previous year. The illegal market is costing Canberra A$1 billion a year in revenue.

British American Tobacco Australia urged the government to ramp up policing and ensure that shops sell only legal cigarettes.

"Dishonest retailers are selling illegal branded cigarette packs imported from Asia and the Middle East, most without health warnings, freely and openly across Australia," said spokesman Scott McIntyre in a statement.

"They appear to have no fear of getting caught because the plain packaging laws are not being enforced at a retailer level."

To stem the growing trade, Australia last year passed tough new laws specifically aimed at tobacco smugglers, with criminals facing 10 years in jail.

But health advocates such as Cancer Council Australia said the way to smash the illegal tobacco market is to cut smoking rates.

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