Experts suggest that Australia’s Treasury should contemplate freezing the tobacco excise due to rising demand for black market cigarettes and ongoing governmental discussions about the issue.
Recent discussions within Australia's Treasury have indicated a potential reevaluation of the tobacco excise policy as the black market for cigarettes continues to thrive. Experts, including Lachlan Vass from the e61 Institute, argue that analyzing 'price elasticity' and consumer demand for tobacco is crucial for understanding potential reforms to the existing excise system. The ongoing increase in illegal tobacco sales poses significant challenges to government revenue, with estimates showing a $17.8 billion deficit since the excise was last adjusted.
Despite mounting pressure for reconsideration, both Treasurer Jim Chalmers and Health Minister Mark Butler have previously dismissed the idea that lowering cigarette prices could mitigate the challenges posed by the black market. However, in a recent Senate estimates session, Finance Minister Katy Gallagher indicated a willingness to explore adjustments to excise as part of a broader strategy to combat the illegal tobacco trade, hinting at possible changes in fiscal policy.
The implications of such a change are far-reaching; should the government decide to implement a freeze or reduction in the tobacco excise, it could significantly impact both legal tobacco sales and the illegal market dynamics. Policymakers must balance public health concerns, given that lower prices may increase tobacco use, with the urgent need to curtail illegal trade that undermines both revenue and regulation. As discussions continue, stakeholders from various sectors will need to engage in a comprehensive dialogue to navigate these complex issues.
