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Illicit Tobacco Parliamentary Joint Committee on Law Enforcement Illicit Tobacco © Commonwealth of Australia 2020 ISBN 978-1-76093-146-9 This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License. The details of this licence are available on the Creative Commons website: https://creativecommons.org/licenses/by-nc-nd/4.0/. Contents Members ............................................................................................................................................... v Abbreviations ................................................................................................................................... vii Chapter 1—Introduction .................................................................................................................... 1 Chapter 2—Illicit tobacco in Australia ............................................................................................ 7 Chapter 3—Drivers and impacts of illicit tobacco ...................................................................... 21 Chapter 4—Addressing illicit tobacco: recent initiatives .......................................................... 41 Chapter 5—Next steps ...................................................................................................................... 61 Appendix 1—Submissions .............................................................................................................. 81 Appendix 2—Public Hearings and witnesses ............................................................................. 87 Appendix 3—Additional documents ............................................................................................ 93 iii Members Committee Membership during the 46th Parliament Chair Mr Craig Kelly MP LP, NSW Deputy Chair Dr Anne Aly MP LA, WA Members Senator Alex Antic LP, SA Senator Paul Scarr LP, QLD Senator Sue Lines ALP, WA Senator Helen Polley ALP, TAS Mr Pat Conaghan MP NATS, NSW Hon Justine Elliot MP ALP, NSW Former Members Mr Llewellyn O'Brien MP NATS, QLD Committee Membership during the 45th Parliament Mr Craig Kelly MP (Chair) LP, NSW Senator the Hon Lisa Singh (Deputy Chair from 08.02.2017) ALP, TAS Mr Chris Hayes MP (Deputy Chair until 08.02.2017) ALP, NSW Senator the Hon Eric Abetz LP, TAS Dr Anne Aly MP ALP, WA Senator Jane Hume LP, VIC Senator the Hon Kristina Keneally ALP, NSW Mr Llew O'Brien MP NATS, QLD Ms Clare O'Neil MP ALP, VIC Mr Jason Wood MP LP, VIC Senator Catryna Bilyk ALP, TAS Senator David Bushby LP, TAS Senator the Hon Richard Colbeck LP, TAS Senator the Hon Don Farrell ALP, SA Senator Skye Kakoschke-Moore NXT, SA Senator Malarndirri McCarthy ALP, NT Senator Barry O'Sullivan v Committee Membership during the 44th Parliament Mr Craig Kelly MP (Chair) LP, NSW Senator the Hon Lisa Singh (Deputy Chair) ALP, TAS Senator Sean Edwards LP, SA Mr Chris Hayes MP ALP, NSW Senator Chris Ketter ALP, QLD Senator David Leyonhjelm LDP, NSW Mr Russell Matheson MP LP, NSW Senator Barry O'Sullivan NATS, QLD Ms Maria Vamvakinou MP ALP, VIC Mr Jason Wood MP LP, VIC Senator the Hon David Johnston LP, WA Secretariat Mr Sean Turner, Secretary Ms Kate Gauthier, Principal Research Officer Ms Stephanie Gill, Administrative Officer (to 2.8.2020) Ms Alice Clapham, Administrative Officer (from 3.8.2020) PO Box 6100 Telephone: (02) 6277 3419 Parliament House CANBERRA ACT 2600 Email: [email protected] Committee webpage vi Abbreviations committee Parliamentary Joint Committee for Law Enforcement WHO World Health Organization Tobacco Convention World Health Organization (WHO) Framework Convention on Tobacco Control Tobacco Strategy National Tobacco Strategy 2012–2018 Tobacco Protocol Protocol to Eliminate Illicit Trade in Tobacco Products ATO Australian Taxation Office Philip Morris Philip Morris Limited ABF Australian Border Force ACIC Australian Criminal Intelligence Commission British American Tobacco British American Tobacco Australia DIBP Department of Immigration and Border Protection AAR Alliance of Australian Retailers' AIHW Australian Institute of Health and Welfare Imperial Tobacco Imperial Tobacco Australia clan labs clandestine drug laboratories AMA Australian Medical Association TPP Act Tobacco Plain Packaging Act 2011 AFP Australian Federal Police OMCGs Outlaw motorcycle gangs TAP Act Tobacco Advertising Prohibition Act 1992 ACCC Australian Competition and Consumer Commission Tobacco Committee Interdepartmental Committee on Tobacco Control TGA Therapeutic Goods Administration vii DFAT Department of Foreign Affairs and Trade ITIG advisory group Illicit Tobacco Industry Advisory Group Excise Act Excise Act 1901 Customs Act Customs Act 1901 Customs Bill Customs Amendment (Illicit Tobacco Offences) Bill 2018 Treasury Bill Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018 ANAO Australian National Audit Office EEGs Excise Equivalent Goods Police Federation Police Federation of Australia TPP Regulations Tobacco Plain Packaging Regulations 2011 viii Chapter 1 Introduction 1.1 The illicit tobacco market has been a cause for growing concern for law enforcement agencies over the past decade, both in Australia and globally. Illicit tobacco is an issue of key concern to law enforcement and health agencies in Australia as it undermines tobacco control policies designed to reduce rates of smoking, and involves organised criminal gangs in the importation, manufacturing and distribution of illicit tobacco products. 1.2 In order to better understand the nature of the illicit tobacco market and how the Australian Government should continue its efforts to reduce its size and prevalence, the Parliamentary Joint Committee for Law Enforcement (committee) commenced an inquiry on 2 December 2015.1 The inquiry lapsed with the dissolution of the 44th Parliament, and was reinitiated and lapsed again with the dissolution of the 45th Parliament. Within the 46th Parliament, the committee reinitiated the inquiry on 24 July 2019. 1.3 The terms of reference required the committee to examine the use and consequences of illicit tobacco in Australia, including the importation of contraband, counterfeit, and unbranded tobacco as well as domestically grown illicit tobacco. In particular, the committee examined: (a) the nature, prevalence and culture of illicit tobacco use in Australia, including in indigenous, regional and non-English speaking communities; (b) the role of Commonwealth law enforcement agencies in responding to the importation, use, manufacture, distribution and domestic growth of illicit tobacco; (c) the loss of revenue to the Commonwealth arising from the consumption of illicit tobacco products; (d) the involvement of organised crime, including international organised crime, in the importation, distribution and use of illicit tobacco in Australia; (e) the effectiveness of relevant Commonwealth legislation; and (f) other related issues. 1.4 This report presents and considers the problem, including how the illicit tobacco market and government responses to it have changed since the inquiry commenced, and presents the committee's findings and recommendations. 1 Pursuant to paragraph 7(1)(g) of the Parliamentary Joint Committee on Law Enforcement Act 2010. 1 2 Background 1.5 Successive Australian Governments have aimed to improve the health of Australians by reducing smoking rates in Australia. The Australian Medical Association advised this inquiry that 'tobacco is unique among consumer products in that it causes disease and premature death when used exactly as intended. There is no safe level of tobacco smoking.'2 1.6 The Department of Health shared this view, and submitted: The Department does not support tobacco use in any form; there is no safe level of tobacco consumption, regardless of whether tobacco products are obtained through licit or illicit markets.3 1.7 A number of approaches are used to reduce smoking rates in Australia: encouraging individuals to not smoke, restricting the availability of tobacco products and using price-based incentives to lower the affordability of tobacco. 1.8 This affordability approach is achieved by imposing high rates of taxation, which then lower the rates of consumption by increasing the cost. A negative consequence of these high taxes is that some tobacco users then seek to avoid those taxes by purchasing untaxed, illicit tobacco. These taxes are now at one of the highest levels in the world which both reduces smoking rates and increases incentives for illicit tobacco. 1.9 At its essence, the illicit tobacco market is driven by these individuals' attempts to avoid Australia's approach of using price-based incentives of increased taxation to reduce tobacco usage. The Department of Health submitted that '[b]y being cheaper, illicit tobacco impacts directly on the effectiveness of price- based public health policies aimed at decreasing smoking rates.'4 1.10 Attempts to evade tobacco taxes can take the form of one-off actions, generally by misusing the duty-free provisions of international travel, or via systemic and ongoing efforts of an illicit market, which is by its nature organised crime. 1.11 In order to properly understand the illicit tobacco market in Australia, it is necessary to consider the overall framework of the Australian Government's approach to tobacco, including the flow-on consequence of the stimulation of the illicit tobacco market. Australia's tobacco control regime 1.12 Australia's approach to tobacco control is consistent with Australia’s obligations as a party to the World Health Organization
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