Chapter 1
Introduction
Referral of the inquiry
1.1
On 27 June 2012, the Attorney-General, the Hon Nicola Roxon MP,
introduced the Customs Amendment (Smuggled Tobacco) Bill 2012 (Bill) into the
House of Representatives.[1]
On 29 June 2012, the Senate referred the provisions of the Bill to the Legal
and Constitutional Affairs Legislation Committee (committee) for inquiry and
report by 14 August 2012.[2]
Purpose of the Bill
1.2
Currently, section 233 of the Customs Act 1901 (Customs Act)
creates an offence for the smuggling of any goods and their conveyance and
possession, including tobacco products. These offences can only be prosecuted
by way of a Customs prosecution and are punishable by a financial penalty only
(of up to five times the duty evaded).[3]
1.3
The Explanatory Memorandum to the Bill states that, on some occasions,
the investigation of a smuggling offence results in the identification of
sufficient evidence to warrant the pursuit of fraud offences under the Criminal
Code Act 1995 (Cth). In these cases, offences carry penalties of up to 10
years imprisonment.[4]
1.4
The Bill proposes to amend the Customs Act to create criminal offences
for the smuggling of tobacco products and for the conveyance or possession of
smuggled tobacco products where the person conveying or possessing the goods
knows they were smuggled.[5]
The proposed new offences would combine the penalties of the existing smuggling
and fraud offences by providing a pecuniary penalty of up to five times the
duty evaded in addition to up to 10 years imprisonment.[6]
Key provisions of the Bill
1.5
Item 2 of Schedule 1 of the Bill would insert new section 233BABAD
into the Customs Act and create an offence where:
- a person imports tobacco products with the intention of 'defrauding
the revenue' (proposed new subsection 233BABAD(1)); or
- a person conveys or possesses tobacco products which the person
knows were imported with the intent of defrauding the revenue (proposed new
subsection 233BABAD(2)).
1.6
Proposed new subsection 233BABAD(3) provides that when prosecuting a
person who conveys or possesses smuggled tobacco products, it would not be
necessary to prove the identity of the person who imported the goods.
1.7
Proposed new subsection 233BABAD(4) provides that, in each case, the
offence would be punishable by up to 10 years imprisonment, a fine of up to
five times the duty evaded (if this can be determined by the Court), or both.
If the amount of duty cannot be determined by the Court, a fine of 1000 penalty
units would apply.
1.8
Proposed new subsection 233BABAD(6) provides that a person convicted or
acquitted of an offence under the proposed changes would not be liable for
smuggling proceedings under section 233 of the Customs Act in respect of the
same conduct. This aims to ensure that a person cannot be prosecuted twice for
the same offence.
1.9
Proposed new subsection 233BABAD(7) would link the definition of tobacco
products with goods classified in the Customs Tariff Act 1995 (Tariff
Act). The Tariff Act classification includes a broad range of tobacco
products including unmanufactured tobacco, tobacco refuse, cigars, cheroots,
cigarillos, cigarettes, other manufactured tobacco, homogenised and
reconstituted tobacco, and tobacco extracts and essences.
1.10
Item 1 of Schedule 1 of the Bill would amend section 210 of the Customs
Act to allow an officer of the Australian Customs and Border Protection
Service, the Australian Federal Police or the police force of a state or territory
to arrest a person without a warrant where the officer believes, on reasonable
grounds, that the person has committed or is committing an offence relating to
the smuggling of tobacco products.
Rationale for the Bill
1.11
When introducing the Bill, the Attorney-General stated that the current
penalties for illegal tobacco importation '...are not necessarily an effective
deterrent, as many penalties currently imposed for tobacco smuggling are not
paid'.[7]
Prior to introduction of the Bill, the Attorney-General noted in a media release:
...current penalties for illegal importation are very low
compared to other serious instances of fraud against the Commonwealth.
Penalties must provide a strong deterrent to criminals
involved in this activity, as well as demonstrate the seriousness, with which
the Commonwealth treats such criminal acts.[8]
1.12
The Attorney-General also noted that to date '...tobacco smuggling has
not represented a major threat in Australia and Australian Customs and Border
Security have been successful in intercepting hauls of illicit tobacco heading
for Australia'.[9]
Background
National Preventative Health
Taskforce
1.13
In April 2008, the Australian Government established the National Preventative
Health Taskforce to gather evidence and develop strategies to tackle the health
challenges caused by tobacco, alcohol and obesity in Australia.[10]
On 30 June 2009, the taskforce released the National
Preventative Health Strategy to address these issues.[11]
1.14
Accompanying the strategy was a technical report into tobacco control in
Australia.[12]
The technical report made a number of recommendations to reduce smoking
prevalence including increasing customs and duty on tobacco smoking, mandating
the plain packaging of cigarettes and increasing funding for anti-smoking
advertisements. Actions 1.2 and 1.3 of the report also recommended that the Australian
Government develop and implement a coordinated national strategy to prevent the
emergence of illicit trade of tobacco in Australia and to contribute to the
development and implementation of international agreements aimed at combating
illicit trade.[13]
1.15
The technical report made reference to evidence from the United Kingdom indicating
that tobacco smuggling is responsible for about 4,000 premature deaths every
year, four times the number of deaths that are caused by the use of all other
smuggled illegal drugs combined.[14]
The research estimates that approximately 21 per cent of all tobacco
smoked in the United Kingdom enters the country by way of smuggling, which
accounts for a 12 per cent lower price of legal tobacco.[15]
1.16
The technical report also noted that Canada and Singapore had moved to
introduce excise stamps on cigarettes to identify legitimate tobacco products
and detect counterfeit or contraband products.[16]
In 2000, the United Kingdom also introduced a strategy to tackle tobacco
smuggling through increased funding for pursuing and prosecuting organised
crime and by increasing penalties to deter offending.[17]
Government response
1.17
On 11 May 2010, the Australian Government released its response to the
National Preventative Health Strategy.[18]
The government agreed with many recommendations relating to tobacco and developed
an anti-smoking action plan that committed to increasing tobacco excise by 25
per cent, introducing legislation to mandate the plain packaging of tobacco and
allocating further funding for anti-smoking advertisement campaigns.
1.18
In responding to the recommendations on preventing the illicit trade of
tobacco, the government noted:
Australia has in place a strong legislative and regulatory
framework to control the illicit trade in tobacco products.
The Australian Taxation Office and the Australian Customs and
Border Protection Service (Customs and Border Protection) have an active
ongoing role in monitoring and enforcement activity against illicit tobacco
production or importation.[19]
Tobacco smuggling in Australia
1.19
There is no official estimate of the size of the illicit trade in
tobacco in Australia.[20]
It was estimated in the 2010 National Drug Strategy Household Survey
that 4.9 per cent of smokers used loose unbranded tobacco and that 1.5 per cent
of smokers used loose unbranded tobacco more than half the time.[21]
1.20
In May 2012, the tobacco industry released a report on the illicit trade
in tobacco in Australia.[22]
The report found that, in 2011, the size of the illicit tobacco market was
equivalent to 13.4 per cent of the legal tobacco market.[23]
However, in its submission to the current inquiry, the Department of Health and
Ageing informed the committee that it considers that the report:
...contains a range of methodological flaws that lead it to
substantially exaggerate the size of the illicit trade in tobacco in Australia.
Nevertheless, the illicit tobacco trade remains a public
health concern in Australia, given its potential to undermine Government action
to reduce smoking rates.[24]
1.21
Tobacco smuggling is monitored by the Australian Customs and Border
Protection Service (Customs) in conjunction with other Commonwealth and state
agencies such as the Australian Federal Police and the Australian Tax Office.
According to Customs, the majority of criminal entities involved in tobacco
smuggling are experienced, highly organised and extensively networked.[25]
Deterring and disrupting tobacco smuggling is a whole-of-agency activity by Customs,
targeting high-risk imports using border detection technologies such as
container examination facilities at ports.[26]
1.22
During 2010–11, Customs made 55 detections in sea cargo arriving in
Australia, amounting to 258 tonnes of tobacco and 82 million cigarettes.[27]
The loss of revenue for the Australian Government would have been $135 million
plus Goods and Services Tax had the smuggling attempts been successful.[28]
Conduct of the inquiry
1.23
Details of the inquiry, the Bill and associated documents were published
on the committee's website. The committee also wrote to a number of
organisations, inviting submissions by 13 July 2012.
1.24
The committee received seven submissions, which are listed at Appendix
1. All submissions were published on the committee's website at www.aph.gov.au/senate_legalcon.
The committee did not hold a public hearing for this inquiry.
Acknowledgement
1.25
The committee thanks the organisations who made submissions to the
inquiry.
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