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. 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.
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.'
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.
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.'
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 (WHO) Framework Convention on Tobacco Control (Tobacco Convention) discussed later in this chapter, and the National Tobacco Strategy 2012–2018 (Tobacco Strategy).
1.13
In line with the requirements of the Tobacco Convention, the Department of Health has primary responsibility for developing Australia's tobacco control policies, and has a leadership role in engaging with relevant Commonwealth, state and territory agencies.
National Tobacco Strategy 2012-2018
1.14
Australia’s approach to tobacco regulation is outlined within the Tobacco Strategy, a sub-strategy of the National Drug Strategy 2010–2015. The Tobacco Strategy was endorsed by all Australian Commonwealth, state and territory Health Ministers in November 2012.
1.15
The Tobacco Strategy outlines three actions to help achieve priority six, that directly relate to minimising trade in illicit tobacco:
6.3.5 Continue to engage in international cooperation relating to tobacco taxation and addressing illicit trade in tobacco products, including through the WHO [Tobacco Convention].
6.3.6 Continue enforcement efforts to prevent the illegal importation and illegal supply and cultivation of tobacco and enhance technology and support systems to identify and respond to illicit trade in tobacco.
6.3.7 Continue to monitor the supply and use of illicit tobacco in Australia and effective approaches to reduce the illicit trade in tobacco.
1.16
Many submitters stressed that Australia's strategies to reduce tobacco consumption are not only effective, but are world-leading. Submitters pointed to taxation increases as being 'one of the most effective ways to reduce the prevalence of smoking'. Such taxation increases are also a requirement of the Tobacco Convention, article 6.
1.17
Submitters also stressed that the use of illicit tobacco needs to be addressed as part of the broader effort to reduce tobacco consumption. As the Cancer Council of Australia submitted:
Enforcement of Australia’s illicit tobacco laws is critical to reducing the prevalence of smoking in Australia, as it ensures that smokers remain in the legal tobacco market and are therefore subject to the full range of Australia’s world-leading tobacco control efforts (including price measures, graphic health warnings and plain packaging).
Framework Convention on Tobacco Control
1.18
The 2003 Tobacco Convention was the first global health treaty, developed 'in response to the globalisation of the tobacco epidemic and is an evidence-based treaty that reaffirms the right of all people to the highest standard of health'. Its provisions commit nations to implementing tobacco control measures, including policies to combat illicit trade. The Tobacco Convention entered into force in February 2005 and has 181 signatories, including Australia.
1.19
Provisions within the Tobacco Convention that are of particular relevance to illicit tobacco are:
Article 6 of the Tobacco Convention recognises that 'price and tax measures are an effective and important means of reducing tobacco consumption'.
Article 15 is concerned directly with illicit tobacco and specifies the requirements that parties to the WHO Tobacco Convention have committed to implement. These include:
ensuring tobacco products are marked to determine the origin of the tobacco product (such as developing a tracking and tracing regime);
monitoring and collecting data on cross-border trade in tobacco products to share between authorities;
enacting or strengthening legislation against illicit trade in tobacco products;
destroying confiscated products, including manufacturing equipment;
monitoring, documenting and controlling the storage and distribution of tobacco products within the each party's jurisdiction;
confiscating proceeds derived from the illicit trade in tobacco products; and
promoting cooperation between national agencies, and relevant regional and international intergovernmental organisations with a special emphasis on cooperation at regional and subregional levels to combat the trade in illicit tobacco products.
Tobacco Protocol
1.20
The WHO developed the Protocol to Eliminate Illicit Trade in Tobacco Products (Tobacco Protocol), which seeks to eliminate 'all forms of illicit trade in tobacco products through a package of measures to be taken by countries acting in cooperation with each other'. The Tobacco Protocol was negotiated over several years and entered into force on 25 September 2018.
1.21
According to the WHO, the Protocol:
…aims to make the supply chain of tobacco products secure through a series of measures by governments. It requires the establishment of a global tracking and tracing regime within five years of entry into force of the Protocol, comprising national and regional tracking and tracing systems and a global information sharing point located in the Secretariat of the WHO [Tobacco Convention]. Other provisions to ensure control of the supply chain include licensing, record keeping requirements, and regulation of Internet-sales, duty-free sales and international transit.
1.22
Australia is not signatory to the Tobacco Protocol. The Department of Health informed the committee that:
Under domestic arrangements, Australia is only able to accede to the Protocol once all necessary domestic laws are in place to implement obligations under the Protocol once it enters into force. For Australia to become a Party to the Protocol, legal and regulatory changes would be required to achieve full compliance.
1.23
These 'legal and regulatory changes' relate to the requirement of the Tobacco Protocol to implement a 'track and trace' regime, which may be in contravention of current Australian tobacco plain packaging laws. The committee was also advised in 2016 that the Department of Health 'has commenced work on the domestic processes required to inform a decision on whether to accede to the Protocol', but this advice had not been updated.
1.24
Further discussion of this issue, including what is involved in a 'track and trace' regime and how such a regime might potentially be in conflict with Australia's current laws and regulations in relation to tobacco plain packaging, is provided in chapters four and five.
Report structure
1.25
Following this introductory chapter, this report is divided into two substantive chapters.
1.26
Chapter two broadly examines the background material on the illicit trade in tobacco products. It first defines the type of tobacco products that are available on the illicit tobacco market, as well as how different aspects of that market operate. The chapter then focuses on the contested issue of estimating the size of the illicit tobacco market.
1.27
Chapter three examines the drivers of illicit tobacco, and outlines the roles and responsibilities of the various government agencies involved in addressing illicit tobacco.
1.28
Chapter four outlines the recent work that has been done, particularly during the course of this inquiry, to provide a more coordinated approach to tackling illicit tobacco and strengthening laws to improve prosecution rates.
1.29
Chapter five, the final chapter, examines current gaps and outlines some options for how Australia might further improve efforts to tackle illicit tobacco.
Conduct of the inquiry
1.30
The committee advertised the inquiry from the 44th Parliament in The Australian and on the internet for both the 44th and 45th Parliaments. The committee also invited submissions from interested organisations, individuals and government bodies. The committee received 182 submissions. A list of individuals and organisations that made public submissions, together with other information authorised for publication is provided at Appendix 1. This list separates those submission received in the 44th, 45th and 46th Parliaments
1.31
There were three public hearings in Canberra for this inquiry. These hearings were held on 4 March 2016, 23 November 2016, 22 March 2017 and 6 December 2019. The witnesses who appeared before the committee are listed in Appendix 2.
1.32
The committee thanks the organisations and individuals that made written submissions, and those who gave evidence at the public hearings.