Popping Down to the Shops and Into Australia's Booming Tobacco Black Market

When Treasurer Scott Morrison announced in May's Budget that Australians are set to pay $45 for a packet of cigarettes by September 2020, Aussie smokers were outraged. Meat pies were dropped in shock, VBs tossed in anger. A collective howl swept through the nation's smokers, like wolves on heat their cries echoed through the night: You can't farken do that to our daaarts, fuck ya.

Though do that to their darts the government did. As of September 1, 2016 the tobacco tax is set to increase again. Next month's surge is expected to raise ciggie prices by between $1.30 to $3.35 per pack, depending on size. Then between 2017 and 2020 there will likely be a steady tax rise of 12.5 percent each year.

Some have argued the rise in cigarette prices will lead to more people quitting. Others contend the price hike will add strength to an already booming tobacco black market and lead to an increase in tobacco related criminal activities.

Despite some successful efforts by law enforcement to stop the flow of illicit tobacco into the country, it is still being smuggled in and sold relatively freely across Australia.

One buyer is 60-year-old Melbourne man "Guido," a pack-a-day smoker and regular purchaser of illegally imported cigarettes. On the condition of anonymity, he agreed to let me tag along while he did his thing.

As Guido drives me to his vendor of choice, I ask him why he turned to buying black market cigarettes. "Cigarettes were becoming too dear," he explains. "I have no intention of stopping smoking, so you find the alternative—and you find that alternative very easily," he adds, as we pull up in front of a string of small residential shops in Melbourne's outer suburbs.

Guido is definitely not the only one buying his cigs under the table. Around 14 percent of the total tobacco consumed in Australia is black market, in total about 2.4 million kilograms per year smuggled in from overseas. That means the government is left with a $1.4 billion-sized hole—lost revenue from untaxed product.

I follow Guido into the store, and watch the simple process both he and the shop owner have definitely played out many times before. Guido walks in and makes small talk with the old Chinese man at the counter. The Chinese man reaches down behind the counter and pulls out a carton of smokes smuggled from China. Guido pays, and then the small talk continues for a few more minutes until Guido leaves. Same time, same place, next week.

As we leave I ask the owner how business is going. I'm curious whether he's encountered any attention from the cops. "This is the best time to be in business," he says. "I've been doing this for a long time and I have my regulars but lately every day new people come. Of course, I'm careful. I'm a good judge of people, I can smell a fish when one walks in."

Over the next two years this might get trickier as the Australian Border Force has dedicated $7.7 million to fight unlawful importation of tobacco products. With cigarette prices set to rise steadily, the Australian government anticipates a spike in illegal tobacco smuggling from overseas is coming.

After leaving the store Guido invites me for a beer and we chat about his life. He says he's never committed a crime in his life, he's been smoking since he was a teenager. I ask him if having to buy illegal tobacco makes him feel like a criminal.

"No, I consider myself smart," he says confidently. "I can buy two packets for the price of one, why wouldn't I? The government asked for this. These penguins in their suits keep raising the prices until people have no choice but to find alternatives and now the illegal cigarette trade has reached a point where it can't be stopped."

We step outside and Guido offers me a forbidden smoke. I light it up and ask him if he sees any way to fix this booming black market. "Just think about how much money the government is losing every day. You sit in front of any of these shops and watch all the people that walk out holding those black plastic bags full of illegal smokes," he says, taking a drag. "That's money the government isn't getting. Instead it's going toward illegal gang activities. And it's only going to get worse."

He's right. Although illicit tobacco might seem like a pretty weak issue, it's a huge money-maker for organised crime. Profits often go towards the smuggling harder drugs and funding other illegal activities.

Faced with being cut off from their money maker, it seems crime syndicates are hitting back. Just a few days ago it was revealed an Australian tobacco executive was bashed and stabbed in an attempted kidnap in Sydney back in June. It's believed the man, a manager of tobacco giant British American Tobacco, was assisting police in their investigations into black market tobacco.

"This has been happening with marijuana, slightly different circumstances but the story is more or less the same; how many years has marijuana been around? Since man has existed," Guido says.

"You make it illegal and people will still smoke it… I'm not a politician but I would immediately drop cigarettes to $12–$13 and you stop illegal trade just like that. You don't need a university degree to figure that out."

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