Australia’s Cigarette Wars Turn Violent

08.27.16
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World News /27 Aug 2016
08.27.16

Australia’s Cigarette Wars Turn Violent

Australia is facing an uphill climb in its battle against a flood of illegal cigarettes (known as “chop-chop”), and recent news suggests organized crime groups have decided to up the ante. Earlier this month, reports emerged that a British American Tobacco (BAT) executive was stabbed by three men outside his Sydney home back in June. In what was apparently a botched kidnap attempt, the BAT manager (a former NSW policeman who had been working closely with law enforcement to combat smuggling) managed to fight off his assailants before being taken to hospital. The attack, which has understandably shocked the law enforcement community, has been linked to BAT’s support for police efforts to tackle the burgeoning illegal tobacco trade.

The roots of Australia’s problem with the black market stem at least in part from recent public health policies as successive governments have tried to drive down smoking rates. Alongside plain packaging rules that replaced brand names and labels with images of smoking-related diseases, taxes on cigarette packs have continually increased.

In the 2016 federal budget, treasurer Scott Morrison announced that the government would hike tobacco excise duty by 12.5 percent every year between 2017 and 2020, meaning Australian smokers will pay more than $45 for a pack of cigarettes by the end of the decade. In addition to bringing in an estimated $4.7 billion in additional revenue, the move is projected to make Australia the most expensive place to smoke (legal) tobacco in the world.

Unfortunately, those extra tax dollars have come at their own price. The government’s plain packaging policy and successive duty hikes have resulted in the exponential growth of an illicit tobacco trade controlled by organized crime groups, like the ones suspected to be responsible for the attack on the BAT manager. As prices increase, more and more smokers are turning to the off-market chop-chop readily available in Sydney and other major cities. Reporting on the trade in Sydney in 2014, for example, the Sydney Morning Herald found that a pack of cigarettes bought off the books only cost half as much as a legal pack. As reported by KPMG, 14.3 percent of all tobacco products consumed in Australia during the twelve months to June 2015 were purchased on the black market. If those products had been bought legally, the government would have received some $1.42 billion in excise duty.

Beyond the financial losses, the money flowing to cigarette smugglers has real implications for public safety. Profits made from illegal tobacco have been used to fund terrorist groups, and small-time criminals in Europe have used cigarette peddling to raise money for devastating attacks linked to ISIS. As the Australian Crime Commission has pointed out, criminal organizations in general rely on cigarette smuggling as a profitable, lower-risk source of revenue compared to hard drugs and other contraband. As if to drive the point home, a corruption scandal that came to light earlier this year uncovered kickbacks paid by these criminal groups to the Department of Agriculture and other border officials to help them get their chop-chop through. There are also health concerns, as cigarettes produced illegally overseas don’t trouble themselves with respecting product standards in force in Australia.

In June of this year, the government announced the creation of two new “tobacco strike team units,” charged with fighting these organized crime networks. In April, the Australian Border Force dismantled a Melbourne-based trafficking ring that has illegally imported 13 million cigarettes and robbed the government of $45 million in revenue. Amazingly, those major busts still only represent a drop in the bucket compared with the amount of illegal tobacco bought and consumed in Australia annually. Even so, the recent attack seems to indicate that police efforts have been enough to ruffle feathers. Unfortunately, the work of the special units dedicated to combatting the tobacco trade receives only modest support and funding from the government.

Australian policymakers find themselves in something of a paradox, as pressure mounts from health advocates for doubling down on measures (like the tax increases) that in turn grow the market for illegal tobacco. Previously partnerships between the tobacco industries and law enforcement have helped successfully interdict at least some of the inflows, but even those relationships have been targeted. The WHO’s Framework Convention on Tobacco Control (FCTC), for one, discourages contact between policymakers and the tobacco industry, and both the FCTC and public health groups have used its guidelines to try and keep law enforcement agencies from working with tobacco interests to counter smuggling. In 2013, the FCTC even blacklisted INTERPOL for agreeing to work with the industry.

Under the FCTC’s guidelines, the Australian customs and border officials at the heart of the fight against illegal tobacco might well be barred from attending the body’s next summit on tobacco taxes and regulations, due to take place in New Delhi this coming November. This exclusionary attitude risks undermining the broader fight against smuggling. Stemming from a reflexive fear that officials might be tarnished by any contact whatsoever with private companies, those officials most central to the fight against trafficking find themselves shut out of the global effort to stop trafficking.

It is ultimately up to the Australian government to lend more support to the police units carrying out critical work against smuggling. Given the scale of the task ahead of them, handcuffing law enforcement even further seems neither pragmatic nor logical.

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