Australia’s soaring tobacco taxes have fueled debate over whether lower excise rates could curb the country’s booming illicit tobacco market, though harm reduction advocates say illegal products would likely remain far cheaper than legal cigarettes. Photo credit: Geri Tech, Pexels.
Australia’s illicit tobacco crisis has prompted a rare call from a former senior public health official to reduce cigarette taxes, intensifying debate over whether the country’s long-running excise strategy has reached its limit.
Dr. Nick Coatsworth, who served as Australia’s deputy chief medical officer during the Covid-19 pandemic, told a Senate inquiry into the country’s illegal tobacco crisis that policymakers should consider cutting tobacco excise to draw smokers back to the legal market.
“It is an unusual position that I find myself in,” Coatsworth said, according to Australian media reports, arguing that Australia now faces a “unique position” because of the rapid expansion of illicit tobacco sales. “ We are the biggest market for illicit tobacco in the world, and I think that means that we have to look at every policy lever, policy option available to us,” he added. "Obviously, on the upswing of cigarette prices, we started losing smokers to the illicit market, so it's just logical that we have to consider whether reducing the excise and reducing the cost of legal cigarettes may bring some of those smokers back."
Coatsworth also said that any additional revenue generated from smokers returning to legal products should fund tobacco-control initatives.
Australia has some of the world’s highest cigarette prices after years of repeated excise increases. A legal pack of cigarettes can cost more than A$50 (US$32), while illicit products sell for a fraction of that price. Authorities and industry groups have linked the black-market boom to organized crime activity, including arson attacks targeting tobacco retailers.
According to reports cited during the Senate hearings, Treasury now expects tobacco excise revenue to fall significantly over the coming years as consumers shift away from taxed products.
Public health advocates pushed back strongly against calls for lower taxes. Tobacco control expert professor Becky Freeman of the University of Sydney, who describes smokers as addicts "preyed on by an international, global industry that has very sophisticated marketing and very sophisticated product design,” told the inquiry the government should focus instead on curbing the oversupply of tobacco in Australia while maintaining its current approach to vaping and tobacco-control regulations.
Other speakers at the inquiry argued that cutting excise alone would not eliminate the illicit market because illegal cigarettes would likely remain cheaper than legal products. Tobacco harm reduction advocate Clive Bates told lawmakers that consumer expectations had already shifted. "There are consumer expectations that they can buy these products cheaply without tax now so there's a lot in what's happened that is sort of irreversible," he said. "I think there are other reasons for reducing tax, because it's so brutal and so regressive on those that do pay it. It's like a punishing public policy measure against a usually quite disadvantaged group in society.
"So, I think there are other reasons to do it, but I don't think in itself it is the way to solve this problem. It's part of a package: restructure excise, change the regulation on the safer products, change the communications environment."
A coalition that included the Cancer Council Australia and the Heart Foundation also warned that the tobacco industry was using concern over illicit trade to argue for weaker tobacco controls. "The industry is now using the rise of illicit tobacco to reshape public debate and to push for lower taxes. But illicit tobacco is primarily an enforcement and health issue - not a tax one," the group said. "Even if we were to cut the tobacco tax altogether, illicit products would remain cheaper, while legal tobacco would become more affordable, tobacco industry profits would skyrocket, and smoking rates would increase, undoing decades of progress."
The Australian debate mirrors broader international discussions over the balance between high tobacco taxation, illicit trade, and harm-reduction policies. In neighboring New Zealand, associate health minister Casey Costello previously faced criticism after proposing a freeze on tobacco excise increases and later cutting excise on heated tobacco products by 50% as part of a smoking-reduction trial.