Australian retailers praise new laws against illicit tobacco

MARCH 13, 2018
Stop Illegal
The CEO of the Australasian Association of Convenience Stores (AACS) Jeff Rogut has welcomed recent moves by The Australian Federal Government to penalise illicit tobacco more heavily.
The new legislation by the Government proposes tougher penalties, up to five years in prison for possessing, buying or selling illicit tobacco, and up to 10 years for manufacturing illicit tobacco. It has already passed the Lower House and will now be reviewed by the Senate. The government has committed to closing down the illicit tobacco market and illegal tobacco manufacturing in the country.
Jeff Rogut welcomes the legislation: “For too long, illegal cigarettes with branded logos, tax-free and with no quality control standards, have been sold with impunity in the community. It is worryingly easy for people to access these illegal products, and the lack of a proper response has seen the market spiral out of control.”
In an interview with STOP: ILLEGAL, Jeff gave a sense of how big the trade has become in Australia. “In the past five/six years, the [black] market has just ‘blossomed’”, he says. According to the 2016 KPMG Illicit tobacco report, it accounted for 14% of the total market, equating to A$1.6bn (US $1.25bn) in lost taxes annually. But Jeff thinks this is in fact an underestimate. “Talking to people in Border Control, who are closer positioned to the issue, they suggest this figure is approximately three times larger, between A$4–5bn a year.”
“The AACS has been vocal about the need for authorities to crack down on these criminals and the legislation being progressed by the Government calls for tougher penalties, which are absolutely needed,” says Jeff.
Tobacco is still hugely important for convenience stores in Australia. According to the AACS it accounts for around 38% of their sales and 25% of their profits. It’s the most profitable thing they sell and without it, some retailers wouldn’t survive. So as the black market for cigarettes has grown exponentially, it has been legitimate businesses like those run by his members that he says have suffered the most. “Some of the convenience stores there are losing up to $1000 a week, about $5000 a month, which for a small store is quite an amount of money,” Jeff also notes.
However, loss of revenue is not the only concern for Australian convenience store owners. Jeff is also worried about their personal safety. He says that retailers in the last couple of years have spent between A$25,000 and A$75,000 (depending on the size of the operation) in improving and increasing security to guard against theft of legitimate products. For example, toughening the glass of windows, more sensitive personal alarms for staff, fog cannons that activate when the store is broken into etc.
New DNA technology is also being trialled, where stores put sprays above their door. Once activated, it covers the offender in a particular DNA spray which the police can identify up to three weeks after any robbery.
Despite these investments in security, it is still common in Australian states such as Victoria for criminal gangs to gather at two o’clock in the morning and besiege a store. “The first thing they do is stuff pillowcases full of tobacco. Cash is a secondary thought; the robbers view tobacco as more valuable than cash,” Jeff says.
For more information about the problem of illicit tobacco, read the KPMG Illicit Tobacco Report here.