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Black market tobacco now 14.5 per cent of all consumption, Illicit Tobacco in Australia report shows

THE BILLION dollar illicit tobacco black market has hit a record high as Australian smokers baulk at the price of legal cigarettes.

Criminals are exploiting the high price of legal smokes to make massive profits by smuggling in cheap tobacco from overseas.

Last year 14.5 per cent of all tobacco consumed was illegal, according to a new report.

The Illicit Tobacco in Australia 2014 report states nearly 2.6 million kilograms of illegal tobacco was consumed last year alone with the tobacco black market rocketing by 30 per cent since 2013.

The report by KPMG, commissioned by the world’s biggest tobacco companies, concludes the black market costs the Federal Government $1.35 billion in lost taxes.

The black market boomed during a period when the government increased tobacco excise by 25 per cent.

Legal cigarettes in Australia are among the most expensive in the Asia Pacific region, costing about seven times more than in countries such as China or South Korea.

John Gledhill, managing director of tobacco giant Philip Morris Limited, said: “The government’s excessive tobacco regulations are providing incentives for the black market.

“As cigarette smuggling continues to grow in Australia the government must enforce the law and prosecute people caught selling illicit tobacco.”

The Australian Customs and Border Protection Service said tobacco smuggling is one of its “key strategic priorities”.

“The Service uses a combination of well-trained and highly skilled staff, intelligence analysis and state of the art technology to detect the movement of prohibited imports, including undeclared tobacco, into Australia,” spokeswoman Sophia Dickinson said.

Since last July Customs has detected illicit tobacco 61 times in sea cargo, which consisted of 91.5 tonnes of loose tobacco and $21.4 million worth of cigarettes.

“There have been two successful prosecutions for tobacco smuggling related offences (since last July),” Ms Dickinson said.

“These cases resulted in the handing down of three custodial sentences.”

The biggest factor in the growth of the illicit tobacco black market is the increase in the consumption of ‘chop chop’ — unbranded loose leaf tobacco.

‘Chop chop’ is sold as loose leaf tobacco in 250 gram to half kilogram amounts or in boxes of 100 pre-rolled tubes with no labelling or health warning.

A packet of illegal cigarettes is about $10 cheaper than a legal product, according to the KPMG report.

Retailers can be fined up to $340,000 for selling tobacco products that breach plain packaging laws but as yet the Department of Health has not prosecuted anyone.

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