Australia battles surging illegal tobacco market as organised crime takes over trade

SYDNEY – Australia’s heavy taxes on tobacco have left it with the world’s most expensive cigarettes, but the high prices are believed to be fuelling a dangerous illicit market that has led to growing violence involving organised crime gangs.

A report released on Nov 7 by the Australian Criminal Intelligence Commission (ACIC) and the Australian Institute of Criminology (AIC) found that Australia’s illegal tobacco trade was worth an estimated A$4 billion (S$3.4 billion) in 2024, up from A$1 billion in 2021.

The report said the trade had resulted in a “significant increase in violence”, including territorial disputes among organised crime syndicates that have resulted in murders, kidnappings, assaults, robberies and extortion of stores that refuse to sell the gangs’ products.

More than 200 arson attacks

involving attacks by gangs against rival stores or houses selling illegal tobacco were recorded in the two years to January 2025.

“An extremely lucrative market for illicit tobacco products (including vapes) in Australia has rapidly grown in recent years,” the report said.

“With vast profits to be made, multiple serious and organised crime groups have become involved.”

The dramatic spike has been credited by some analysts to hefty increases in tobacco taxes, which have led to a lucrative black market, including the establishment of thousands of illegal stores across the country.

Most of the illegal cigarettes are believed to come from the United Arab Emirates and China, while most of the illegal vapes come from China. Most are smuggled through regular shipping, according to an expert on illegal markets, Dr James Martin, a criminology lecturer at Deakin University.

Dr Martin told The Straits Times that Australia’s attempts to crack down on cigarettes by imposing massively high prices resembled the ill-fated prohibition era in the United States, which outlawed alcohol but faced a thriving black market involving violent organised crime.

He said the illicit tobacco trade is potentially “more likely to be violent” than the narcotics trade because illegal tobacco – unlike narcotics – is sold relatively openly and so sellers are easily targeted by rival criminals.

Dr Martin said the spike in tobacco taxes over the past 15 years is the main cause of the flourishing illegal market.

“Australia is a guinea pig,” he said. “We have pushed these policies further than anyone else. Now we are reaping the very obvious rewards.”

Australia has long been viewed as a world leader in efforts to combat smoking, including measures such as bans on advertising and the world’s first laws requiring plain packaging, introduced in 2012.

The proportion of Australians aged 18 or older who smoke daily or weekly was 10 per cent in 2023, when the most recent survey was conducted, down from 15 per cent in 2013 and 27 per cent in 1998.

Successive federal governments have boosted taxes on cigarettes, which have lifted the average price of a packet of 20 cigarettes to about A$40, which is by far the most expensive in the world, according to Numbeo, an online cost-of-living database. By comparison, a packet of cigarettes in Singapore is about $15.50.

Illegal packets of cigarettes are believed to cost A$10 to A$20. Currently, the government imposes a tax of A$1.50 per cigarette, up from 47 cents in March 2015. This tax is set to increase by 5 per cent a year. In the year to June 30, 2025, the tax was expected to raise A$7.4 billion. 

An Australian public health expert, Professor Coral Gartner of the University of Queensland, told ST that high prices have helped push smoking rates lower and are not the main cause of the thriving black market, noting that countries such as South Africa and Malaysia with relatively low tobacco taxes often had high levels of illicit trade.

She said the government had failed to properly regulate and oversee tobacco sellers, leading to the “criminal infiltration of the retail sector”.

“If you reduce the tax, it will make the problem worse and increase the overall market base,” she said. “All you will do is make cigarettes in the legal and illicit markets cheaper and this will lead to more younger people taking up smoking.”

The federal government has defended the high tax rate on cigarettes, saying it encourages people to quit smoking.

Health Minister Mark Butler said in September that the illicit trade was not due to high prices but to a global oversupply of cigarettes that led to the “dumping” of the product around the world.

He acknowledged that the illicit trade had led to arson and violence and was “bankrolling” other criminal activities such as sex and drug trafficking.

But some state leaders have expressed concern about the high taxes.

In June, Mr Chris Minns, Premier of Australia’s most populous state, New South Wales (NSW), called for the federal tax to be reconsidered, saying that “something’s gone wrong here”.

The NSW government announced on Nov 5 that it had shut down two stores for the first time under new laws that allow the health authorities to close stores for 90 days for selling illegal tobacco or vapes. Serious breaches can result in 12-month closures.

In the year to Oct 27, the authorities in the state seized more than 11.8 million cigarettes and around 170,000 illegal vaping products.

“This is just the beginning,” NSW Health Minister Ryan Park said in a statement. “If you’re doing the wrong thing, sooner or later we will come for you.”

Prof Gartner said Australia had been successful at targeting demand for cigarettes by increasing prices and running education campaigns about the harms of smoking, but warned that “we are reaching the point where little more can be gained from that approach”.

Instead, she said, the government needs to target supply, including tighter control and enforcement over the types of stores that can sell cigarettes. Eventually, it could look to phase out sales of cigarettes altogether, as it has done for other harmful products such as asbestos.

“Look at who can sell and where they can sell cigarettes (in Australia) – at supermarkets, convenience stores, petrol stations, tobacconists,” she said.

“Leaving tobacco supply up to a corner store to be responsible for sales is not an appropriate gatekeeper for an addictive product that kills. They don’t have the necessary security systems and we can see that they are vulnerable to criminal infiltration from organised crime groups,” she added.

The report by the ACIC and AIC said its estimation that the illegal tobacco market was worth A$4 billion included cigarettes but not vapes, though the illegal vape market is believed to have surged since tight controls were introduced in July 2024 that require vapes to be sold in pharmacies only.

Dr Martin said the A$4 billion, even excluding vapes, is a “vast underestimate”, noting that a growing proportion – and possibly a majority – of cigarettes consumed in Australia was now bought on the black market. He said taxes would need to be significantly lowered and even eliminated to discourage criminals from operating a black market.

“Lowering the tax is politically difficult as the government does not want to admit it got it wrong, and public health experts see it as a backdown to big tobacco,” he said.

“We want to divert people back to the legal market and suck the oxygen out of the black market and give law enforcement a chance at success.”