The Coalition has proposed slashing the tobacco excise, the federal tax on tobacco products, by 80%. It claims cheaper legal cigarettes will draw people who smoke away from the illicit market and deprive organised crime of its profits.

The proposal sounds appealing but is deeply flawed. Australia’s high tobacco tax undeniably makes untaxed sales profitable. Yet this incentive is not by itself a cause.

Whether a tax creates a thriving illicit market depends on the strength of the systems designed to detect and prevent tax evasion, and hold offenders accountable.

International experience tells a different story. Illicit markets thrive where there aren’t proper safeguards in place – meaning products cannot be tracked, agencies work in silos, and penalties fail to deter offenders.

Several countries have reduced illicit trade while maintaining or increasing tobacco taxes. So, what can Australia learn from them?

Cutting the excise won’t solve the problem

The Australian Bureau of Statistics says the quantity of nicotine consumed in Australia increased by almost 40% from 2017 to 2025, underpinned by a large rise in illicit cigarettes and e-cigarettes. Prices for legal products tripled over that time.

Australia’s illicit tobacco crisis is primarily a failure of tax administration. This is the system for collecting tobacco taxes, monitoring products, and enforcing the rules. Illicit markets flourish when taxes are not supported by the administrative safeguards such as tracking needed to secure supply chains and ensure compliance.

The problem is therefore not simply a price gap waiting to be........

© The Conversation