Australia: Illegal Tobacco Costs Govt $1.35bn

Source from:  The Australian 05/04/2015

A record level of illegal tobacco consumption has cost the Australian Government an estimated tax loss of $1.35 billion, a report by KPMG shows.

The report, prepared for Philip Morris, British American Tobacco Australia and Imperial Tobacco Australia, shows that illegal tobacco represented 14.5 per cent of total consumption in 2014.

KPMG estimates that if this tobacco had been consumed legally, it would have represented an excise amount payable to the Australian government of approximately $1.35bn.

Phillip Morris managing director John Gledhill said the growth in illicit tobacco came during a period which saw two 12.5 per cent excise increases and the implementation of plain packaging in December 2012.

"We believe the government's excessive tobacco regulations are providing incentives for the black market and cost its own treasury $1.35bn in lost revenue at a time when it is under severe fiscal pressure," Mr Gledhill said.

The report shows that the tobacco black market has grown by almost 30% in two years. Two further 12.5 percent tobacco tax increases are planned for 2015 and 2016.

Cigarettes in Australia are among the most expensive in the Asia Pacific region, costing 7 times more than in countries like China and South Korea, the primary sources of illegal cigarettes, the report said. Enditem