Black Market Tobacco Costs Australia Nearly $7 Billion in Budget Revenue

Australia's federal budget is facing a significant shortfall, with an estimated $6.9 billion drop in tobacco tax revenue projected between 2024 and 2029 due to the rise of illegal tobacco sales. As more Australians opt for cheaper illegal cigarettes or vapes to avoid high excise taxes, the government is struggling to combat the black market, which has increasingly impacted legitimate revenue streams. The illicit cigarette trade is a growing concern not only in Australia but also in the ASEAN region, where it constitutes 25% of cigarette consumption, posing threats to national security and government revenues. In response, the Australian government has allocated $156 million to enhance enforcement against the illegal tobacco trade, while also aiming to reduce the smoking rate to below 5% by 2030. Despite ongoing efforts, the challenge remains severe due to regulatory loopholes and widespread corruption that enable the black market to thrive. This situation has forced Treasury officials to revise revenue forecasts significantly downward, highlighting the economic impact of the illegal tobacco sector.