Coalition proposes 80% tobacco excise cut to combat illicit market and reduce smoking rates

Opposition Leader Angus Taylor says slashing the tax on a pack of cigarettes by more than 20 dollars will not create more smokers, as the cost of illegal cigarettes is already at that price.

The Coalition has not modelled how its proposed 80 per cent cut to the tobacco excise would affect smoking rates, Shadow Home Affairs Minister Jonno Duniam told ABC's Insiders program, though it has looked at the consequences of similar approaches overseas.

Canada had raised tobacco taxes through the 1980s and 1990s to discourage smoking, but after an explosion in organised crime, Canadian federal and provincial governments slashed tobacco taxes in 1994.

The cuts led to a spike in smoking, particularly among young people, Senator Duniam said, however smoking rates in Canada have ultimately fallen.

"There was a point in time they went up, but over the course of time — as the illicit tobacco trade trailed off — smoking rates went down to where they are now, which is 11 per cent," Senator Duniam said.

"And their policy settings continued that trajectory over that course of time."

Canada's federal and provincial governments eventually restored pre-1994 tax rates on tobacco, which supporters say allowed a gradual return after the black market had been crushed and law enforcement established.

Critics, however, say it failed to provide a permanent fix, with the illicit black market returning, higher youth smoking rates in the meantime, and lost revenue from the tax cut.

Coalition says crime groups must be disrupted

The tobacco commissioner has estimated about half of all tobacco sales in Australia are now through the black market — fuelling billions in proceeds for crime groups, leading to increased violence particularly in Sydney and Melbourne, and eating into federal government revenue from the tax on tobacco.

Senator Duniam said modelling by the Parliamentary Budget Office his party commissioned on how deeply to cut the tobacco excise found a "real change" in consumer behaviour if the excise was cut by 80 per cent.

He said combined with law enforcement and education, Australia's illicit tobacco trade could be stamped out.

"We should also focus on disrupting the capacity for the illicit market to provide these products. That also causes issues for their capacity to supply, impacts their capacity to offer cheaper prices and the combined package altogether, not just the cut in excise, is what we believe will cripple the illicit tobacco market," Senator Duniam said.

"We want to see the smoking rates in this country go down. In order to do that, a part of the problem is dealing with cheap smokes out there in the community now. Kick off the illegal trade is the only way you can do that."

Earlier, Mr Taylor told News24 that to smash organised crime, legal cigarettes needed to be brought to "parity" with illegal tobacco.

"We're confident working with experts, working with the Parliamentary Budget Office, that they can smash that market," Mr Taylor said.

An excise cut of 80 per cent would amount to about $25 being knocked off the price of a pack of 20 cigarettes, bringing those down to about $16 to $26 if the full tax cut is passed on by cigarette retailers.

Asked whether he believed the excise cut would lead to more people picking up smoking, Mr Taylor responded, "No, no I don't [believe that]."

"And here's the point. The horse has already bolted on this. The price of cigarettes in this country is already down around $15 a pack or less … anyone can choose to buy that.

"That's the price, it's already happened. So you have got to recognise the reality here."

Mr Taylor rejected that the Coalition had landed on an 80 per cent excise cut to outcompete One Nation's proposed 75 per cent excise cut.

"We decided to go one better than organised crime and criminal gangs in this country. That's who we're competing with here — that's what this is about," he said.

"It needs to be fixed and it needs to be fixed now. And I'll tell you, every arson attack that we see now we will be saying to the government: 'You can fix this.'