Coalition MPs want to slash tobacco tax by up to 80 per cent to tackle crime

Australia’s illegal tobacco trade has become a matter of national security after entrenching criminal networks that can be exploited by terrorists, the Coalition’s taskforce on the black market has warned, as the party weighs up slashing the excise by up to 80 per cent.

Taskforce co-chairs Mary Aldred and Richard Colbeck have urged their party to take drastic action in a report released on Wednesday, as violent tobacco turf wars persist across the country and federal excise revenue continues to fall.

One Nation beat the Coalition to the punch on a tobacco policy, vowing last week to slash the excise by 75 per cent. Liberal frontbencher Andrew Hastie last week dismissed Pauline Hanson’s suggestion as a thought bubble and said his party was putting in the work to develop costed and considered policy.

Labor has insisted on maintaining the excise, backing experts who argue criminals will always be able to undercut the legal market. The government is also reluctant to relinquish the annual excise revenue, already forecast to plummet to $2 billion by the end of the decade, or provide a signal that it was easier for Australians to take up smoking.

Up to four in five cigarettes now smoked in Australia are illegal, according to the Australian Bureau of Statistics. The tobacco excise is currently $1.55 per cigarette.

The Coalition’s report said the tax rate on tobacco products was the “main driver” of the illicit market and jeopardised the entire tobacco control regime, urging a cut of up to 80 per cent to bring down prices and deprive organised crime of its swelling customer base.

The authors said the booming underground tobacco trade was embedding relationships between smugglers, bikie-linked figures, distributors and violent enforcers. A large amount of cash flowed through these networks, creating “conditions that can facilitate terrorist financing indirectly”.

“Australia’s illicit tobacco trade is ... now part of a broader crime-terror nexus in which highly profitable criminal markets can create funding streams, logistics networks and proxy relationships that may be exploited by extremist or terrorist actors,” the report states, pointing to the alleged involvement of terror group the Islamic Revolutionary Guard Corps in a spate of firebombings in Australia in 2024-25.

The report pointed to the “significant” flow of illegal products purchased online through the nation’s postal service, saying the distribution is essentially unregulated once through border control.

“Once a package is lodged with Australia Post, it goes dark. Unlike private parcel distribution providers, Australia Post does not question what is contained in a package. Nor are they permitted by law to open a package,” the report said, and called for the post office to be empowered to enforce content declarations for parcels and given greater inspection and seizure powers.

The report urged the prime minister to convene national cabinet to reset how states and the Commonwealth co-operate on enforcement and licensing, and boost funding for enforcement agencies.

The government should also consider expanding the legal sale of vapes to ensure manufacturing standards and age limits, and launch a fresh education campaign on the negative health effects of smoking and vaping, the report recommended.

Colbeck said organised crime had defeated the plan to discourage smoking uptake through higher prices, and that it was time for the government to wrest back control of the billion-dollar market.

“Our central recommendation is blunt: drastically reduce the tobacco excise, and do it now, because until the price gap closes, no amount of enforcement alone will fix this catastrophic market failure,” he said.

“When up to 80 per cent of the market is paying organised crime prices of $15-$20 per packet, that is the real price of cigarettes in Australia today.”

Aldred said the report, which consulted small businesses, law enforcement, economists and health experts, was the “most comprehensive account yet of how Australia lost control of this market”.

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