Legal cigarettes went up in price again today, as the automatic increase in the tax on tobacco kicked in.
Critics say the regular increase on the tax has pushed smokers towards the illegal market.
Illegal tobacco now makes up 80% of all nicotine consumed in Australia, according to the Australian Bureau of Statistics (ABS).
One solution now being floated in Canberra is to significantly cut the excise.
Here's what each party is proposing.
Tobacco excise
The Federal Government has taxed tobacco since 1901, making it one of the longest-standing sources of its revenue.
Tobacco excise has been indexed to wages twice a year since 2014.
In 2023, the Government also added a 5% annual increase for three years, which ended last September.
Indexation is when the cost of a good or service is changed to reflect the value of money.
According to a Treasury report published in 2019, there is “a clear relationship” between higher tobacco prices driven by the excise and lower smoking rates.
The numbers
Australia's tobacco excise has risen consistently since 2016, making legal cigarettes among the most expensive in the world.
A legal pack of 20 cigarettes now costs between $40 and $50, most of which is the excise.
Data shows the amount of nicotine being consumed has increased in recent years, which may be driven mainly by cheaper and more accessible illegal products.
Tobacco excise revenue peaked at $16.3 billion in 2020, but the Government estimates it will bring in just $4.1 billion this financial year.
The Australian Criminal Intelligence Commission says illicit tobacco cost Australia $4 billion in 2023-24, through lost tax revenue, healthcare costs and reduced productivity.
While the consumption of nicotine has risen in recent years, overall smoking rates have declined compared to previous decades.
This has been attributed to public health campaigns such as plain packaging and warning labels, alongside other measures including the tobacco excise.
Labor
The Government's plan to limit illegal tobacco is focused on enforcement.
Earlier this year, it introduced a bill to increase penalties for illicit tobacco offences to up to 15 years in prison.
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It's also put $188.5 million into the Border Force to crack down on illegal tobacco shipments.
The Government says the Border Force has seized more than one thousand tonnes of illegal tobacco.
The Labor party is not aligned on policy across the country.
At the state level, NSW Premier Chris Minns has broken ranks, saying the “massive” excise has driven people to the black market.
He hasn't specified how much he thinks the Government should discount the excise, but says he believes it will help with enforcement and harm reduction.
The Coalition
Opposition Leader Angus Taylor has confirmed a Coalition policy on illegal tobacco is in the works, after a taskforce he set up handed down its findings last week.
The taskforce recommended cutting the tobacco excise by up to 80%, which would significantly lower the cost of legal cigarettes.
The Coalition also wants a licensed, regulated framework for legal vape sales, and for the Government to aim for a 5% smoking rate.
One Nation
One Nation wants the tobacco excise cut by 75%, alongside a three-year freeze on indexation.
Under the plan, One Nation leader Pauline Hanson says the price of legal cigarettes would be competitive with illicit packs.
Hanson says the cut would be paired with tougher border enforcement, “faster shop closures” and harsher penalties for traffickers.
Greens
The Greens oppose cutting the tobacco excise.
Party leader Larissa Waters told the Today Show earlier this month that One Nation is trying to “dress up fighting crime” as a way of “boost[ing] the profits of big tobacco”.
The Greens want tobacco and a broader list of industries – including banking, mining, defence, pharmaceuticals, liquor, gambling and racing – to be banned from making political donations.
What's next?
On Friday, a Senate inquiry into the excise handed down its final report.
It recommended the excise be frozen until there is a “meaningful elimination” of the black market.
The next scheduled excise increase is due today.
The Government hasn't announced any plans to freeze it.
