Higher federal tax excises are fuelling Victoria's rampant tobacco black market and a standalone agency should enforce its long-awaited licensing scheme, an inquiry has found. or signup to continue reading In a tabled in state parliament on Thursday, the Labor-chaired Public Accounts and Estimates Committee estimated Victoria's tobacco market was worth $6 billion in 2023. Up to 40 per cent of that could be made up of illegal cigarettes, vapes and other tobacco products based on varying estimates.
Several drivers have contributed to the extensive black market in illicit vapes and cigarettes, the inquiry found. Chief among them was the price differential between legal and illicit cigarettes, absence of a licensing scheme, lack of enforcement activity and minor penalties for illegal activity. "The 'low‐risk high‐reward' nature of these commodities have attracted overseas crime syndicates to the lucrative market," the report said.
In May 2023, federal Health Minister Mark Butler announced the tax on tobacco would increase five per cent each year for three years from September 1, 2023. The inquiry found higher tax excises have made legal tobacco prohibitively expensive, coupled with inflation and subsequent cost‐of‐living pressures. A fixed percentage of revenue from the Commonwealth's tobacco excise should be given to state and territory governments to support increased regulatory and enforcement activities, it said.
Victoria will become the only Australian state or territory without a tobacco licensing scheme from Sunday, when Queensland's begins operating. In March, Premier Jacinta Allan announced Victoria would establish a scheme for retailers and wholesale tobacco suppliers following a spate of store firebombings linked to a black market turf war. The move stemmed from a Commissioner for Better Regulation review, which also suggested an unspecified agency enforce the scheme.
As well as calling for the scheme to cover all nicotine products, the inquiry report on Thursday recommended it be regulated by an independent, well‐resourced, standalone agency within the Department of Justice and Community Safety. It should work with Victoria Police and federal agencies to monitor compliance and enforcement. Ms Allan told reporters on Thursday her government was on track to introduce legislation to parliament to establish the scheme before the end of 2024.
Opposition Leader John Pesutto questioned what was taking so long, but vowed to work with the government. "The Allan Labor government needs to take this report very seriously and act without any further delay," he said. The Greens were similarly scornful of the hold up, saying the Labor government has had years to prepare.
"Victoria is the only state where your cafe or your hairdresser could start selling cigarettes, and right now the only enforcement seems to be firebombing by gangsters," the party's spokesman Tim Read said. There have been about 97 arson attacks on premises selling tobacco since March 2023, police confirmed on Wednesday. The Victorian government is required to formally respond to the inquiry's report within six months.
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