Cutting tobacco tax will not stop Australia’s illegal cigarette trade |
Proposals to slash Australia’s tobacco excise ignore the basic economics of the illegal cigarette market, where untaxed products would remain dramatically cheaper even if tobacco taxes were heavily reduced.
Not for the first time, NSW Premier Chris Minns has called for the Albanese government to make significant cuts to tobacco excise tax. He’s now been joined by Nick Coatsworth. Cutting tobacco tax has now become an established factoid: a prescription repeated so often by lazy journalists who’ve not done the calculations, opposition commentators and callers to radio stations that it is obviously the solution to Australia’s rampant illegal tobacco trade.
Anyone can see, right, that if the price of tax-paid cigarettes could be reduced to make them competitive with untaxed illegal cigarettes, smokers would walk away from the untaxed cheapies and drive them out of the market.
Chris Minns and other politicians in this chorus are used to overseeing multi-billion dollar state financing involving eye-watering elaborate forecasting and modelling. But when it comes to tobacco tax, basic primary school arithmetic appears beyond them.
When those calling for excise reduction move to the next obvious question of the size of their sensible tax cut, a common level proposed is the 2020 rate, a so-called “sweet spot” which preceded the........