BAT may have to leave Australia as illicit tobacco takes over the market. Photo credit: BAT.
A senior executive at British American Tobacco (BAT) warned that the company may have no viable future in Australia as illicit trade continues to expand, urging the government to act on excise policy.
According to the Herald Sun, Kingsley Wheaton, the company’s chief corporate officer, said Australia risks becoming the first developed nation to lose its entire tobacco market to criminal networks. He called on the prime minister to use the May 12 budget to address the issue.
“On 12 May (Budget day) the prime minister has a chance to reverse this. Quite evidently, all the economic arguments and all the rational arguments are the excise is far too high in Australia. But if people won’t react to the facts in front of them and do the right thing, Australia would pull off the feat of becoming the first more economically developed country in the world to have handed its market over entirely to criminals. Budget day is the day where this could crystallize.”
Wheaton said illicit products now account for nearly 75% of Australia’s tobacco market, with illegal cigarettes selling for about A$15 per pack compared with A$50 for legal products. He added that excise revenue has dropped sharply, from a peak of A$17 billion to a projected A$5.5 billion this year.
“They’ve pulled off the spectacular feat of doubling the excise and halving the revenue. The only person who can fix this is the prime minister. It’s on him.”
He argued that cutting excise in half would restore balance. “The fix is simple. Reverse that, half the excise, and bring the revenues back.”
Wheaton also pointed to international examples, saying countries such as Brazil and Romania had regained control over illicit trade, while Australia’s market has moved “completely out of control.” Modeling suggests that, without policy changes, illicit products could account for 90% of cigarette sales by 2030.
Dr. James Martin, a criminologist at Deakin University, said market dynamics may force change before companies act. He warned that if illicit trade reaches 90%-95%percent, retailers could abandon legal tobacco altogether. “And then we have a completely criminal trade,” he said.
“It’s the retailers who are facing very real risks of robbery and assault and if they are not earning enough from legal tobacco then they may decide to stop before BAT can even make that decision. Indeed, we’ve already had a number of high-profile retailers making this decision.”
“I hope that logic, rationality, prevails but that’s the choice - do you want it in the hands of responsible industry players who both collect excise and do the right thing or in the hands of criminals,” Wheaton said, adding that, under those conditions, “if there’s no market for us to compete in, the question is entirely moot.”