Illegal tobacco is burning a AU$4 billion (NZ$4.5 billion) hole in Australia's hip pocket, with skyrocketing tobacco tax blamed for fuelling the underground trade and escalating violence.
Reports from the Australian Criminal Intelligence Commission and Australian Institute of Criminology lay bare the national scale and cost of serious and organised crime.
The direct and indirect cost of organised crime to Australia jumped to AU$82.3 billion (NZ$94 billion) in the 2023/24 financial year, up from AU$68.7 billion (NZ$78.9 billion) in 12 months.
Illicit tobacco's cost of the Australian economy was estimated to be AU$4 billion (NZ$4.5 billion), a four-fold increase over the past three years.
Of that figure, AU$3.3 billion (NZ$3.7 billion) was as a result of lost tax revenue from the tobacco excise, with the rest from associated healthcare costs and reduced productivity.
Organised crime groups' efforts to control the illicit tobacco and vape market has led to 200 fire bombings, at least three murders and countless acts of intimidation and extortion, the commission's chief executive Heather Cook said.
"Legitimate businesses have been forced to close their doors," she said in a speech at Canberra's National Security College on Thursday evening.
"Billions of dollars in lost tax revenue means less money for hospitals, schools and essential services.
"Organised crime syndicates then recycle these illicit proceeds into a range of other criminal activities, further impacting community safety, security and the broader social fabric."
The violence was not contained, spilling into streets and impacting bystanders and entire neighbourhoods, Cook added.
Tobacco sales across Ritchies IGA's 156 shops in Victoria, NSW and Queensland have cratered from AU$300 million (NZ$344 million) to AU$60 million (NZ$68 million) in four years.
Woolworths' tobacco sales in the September quarter were down 51% on the same period last year, while Coles had a 30% drop over the past financial year.
It follows sharp increases in the federal tax on tobacco to AU$1.50 (NZ$1.72) per stick, pushing the average cost of a legal over-the-counter pack of 20 cigarettes in Australia past AU$40 (NZ$45).
Australian Association of Convenience Stores chief executive Theo Foukkare said legal tobacco contributed to about 40% of all non-fuel sales at service stations and corner stores as recently as four years ago.
That has dwindled to about 15%, with Foukkare pointing the finger at the federal government's decision in 2019 to lift the tobacco tax by 55% over three years on public health grounds.
"The crime groups are ... in a smugglers' paradise," he told ABC Radio.
"We have the highest excise in the world. We up until very recently have had very limited enforcement with meaningless fines and effectively next to no prosecutions."
The federal government unveiled a multi-agency national tobacco disruption task force in October after the collapse of tobacco excise revenue.
Two shops in Sydney's north were the first to be shut down for selling illicit vape and tobacco products under new NSW health powers.
While issuing closure orders in raids on Tuesday, NSW Health inspectors seized 3860 illicit cigarettes and 224 illegal vapes at both shops.
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