Smugglers are gonna smuggle

With the price of an entire pack costing less than $1.20 in some countries, there is an enormous incentive to smuggle tobacco products into Australia. It is said that even if nine out of ten containers of illicit tobacco products are intercepted, the profits on the tenth are sufficient to not only cover the losses but also reward the smugglers handsomely.

Smokers, a large proportion of whom are on low incomes, have responded positively. The annual survey of tobacco consumption undertaken by KPMG found illicit tobacco increased from 14% of the market in 2018 to over 20% in 2019. A total of 3.1 million kilograms of tobacco, loose and packaged, were smuggled into the country, avoiding $3.41 billion in excise. This occurred despite a 46% increase in tobacco seizures by Australian Border Force.

To some extent this is of no great concern to anyone except the federal government. Cheap smokes are no more dangerous than the legal kind and, as the Malaysian woman said, the smugglers are merely evading taxes, not something most of us would seriously criticise.

The real problem is that the people smuggling tobacco are also smuggling other things. They are organised, sophisticated, dangerous criminals. Profits from tobacco smuggling are funding these other activities, including human trafficking. According to the US Department of State, traffickers are denying nearly 25 million people "their fundamental right to freedom, forcing them to live enslaved and toil for their exploiter's profit."

The ILO says that at any given time in 2016, there were 40.3 million victims of modern slavery, including 24.9 million in forced labour and 15.4 million in forced marriage. 1 in 4 victims of modern slavery are children.

The response of the federal government has been to boost deterrence and interdiction efforts. Penalties have been increased and, in 2018, it established an Illicit Tobacco Taskforce to "proactively detect, disrupt and dismantle serious organised crime syndicates that deal in illicit tobacco". The result is increased seizures but, as the KPMG survey shows, it is yet to make any difference to the market.

The question is whether it should even expect to make a difference, given smuggling's history. You would have to search long and hard to find where smuggling has been substantially suppressed through law enforcement, particularly in a country that respects legal rights and due process. If the enormous resources devoted to the control of drugs have failed to limit their availability, why should it succeed with tobacco?

The obvious solution would be to remove the incentive to smuggle tobacco into Australia by reducing the excise. Smokers would buy their favourite legal brands if they were cheaper, legitimate tobacco retailers would not be competing against illicit suppliers, and less money would be spent on law enforcement.

Regrettably, learning from history is not something that governments are good at, even when smuggling has such a long history. On tobacco, they never learn.