Australia’s roaring tobacco black market has blown more holes in the federal budget but Treasurer Jim Chalmers continues to stare down calls to tackle the excise driving the trade.
In Dr Chalmers’ mid-year budget update released on Wednesday, Treasury revised down the expected tax take from the tobacco excise by $8.2 billion over four years
“This reflects the persistent and significant decline in legal tobacco consumption,” according to the Mid-Year Economic and Fiscal Outlook.
That would be cheered by the government, which has steadily increased the excise over recent decades in an effort to dissuade smokers, if not for the fact that smoking rates have not declined by anywhere near as fast as excise revenue.
Last week, the government’s illicit tobacco tsar said up to 60 per cent of cigarettes sold in Australia were now bought through the black market.
Excises have pushed up the price of over-the-counter smokes to as much as $50 a pack, driving consumers to illicit alternatives readily available for as little as $15.
The result has been worsening health outcomes, a rise in organised crime and a deterioration in the budget.
The $8.2 billion worsening in the forecast take comes on top of a $6.9 billion downgrade in the March budget.
Since the high point of excise revenue in 2019/20, the yearly take has fallen from $16.3 billion to an expected $5.5 billion this financial year.
It is forecast to fall further to $4.4 billion by 2028/29.
Dr Chalmers acknowledged the government faced a serious challenge with illegal tobacco but said he did not believe unwinding the increase in the excise would fix the issue.
“We don’t believe a tobacco tax cut, as British American Tobacco and some others have proposed to us, will fix the problem,” he told reporters.
The government has boosted enforcement by $350 million in the last two budgets and Dr Chalmers flagged further funding for agencies such as Border Force to tackle organised crime syndicates.
“In taking this challenge very seriously, we understand that we will need to do more,” he said, mentioning discussions with Home Affairs Minister Tony Burke and others on future steps and foreshadowing talks with the states and territories.