ILLICIT TOBACCO MARKET HITTING HONEST RETAILERS HARDER THAN EVER BEFORE

November 25 2014
New independent research from by KPMG LLP in the UK shows the use of black market illegal tobacco in Australia has reached levels never before experienced and, according to the Australasian Association of Convenience Stores (AACS), it’s not just honest retailers who are feeling the effects.
AACS CEO Jeff Rogut said the rampant market for illicit tobacco robs honest retailers of legal sales while increasing the risk of tobacco ending up in the hands of minors. It also prevents the Government from collecting its rightful tax revenue.
The latest KPMG research, Illicit Tobacco in Australia, shows that illegal tobacco use in the last 12 months has increased to account from 13.5% to 14.3% of total consumption. One in every seven cigarettes consumed in Australia is illegal.
“Gangs are profiting from the illegal tobacco market in Australia more than ever before and this criminal behaviour is spiralling out of control,” Mr Rogut said.
“This is largely due to our regulatory environment, as endless tax hikes and policies like plain packaging are contributing to Australia’s growing reputation as one of the world’s most lucrative markets for illegal tobacco.
“This is obviously worrying for responsible retailers of legal tobacco products who are missing out on critical sales. Tobacco accounts for around 36% of sales of a typical convenience store, many of which are small businesses who operate as franchisees or licensees.
“It also raises serious questions about quality control for illegal tobacco products and where these products end up. Criminals are not responsible retailers and they have no issue with selling illegal tobacco to minors.
“The ramifications of a growing illegal tobacco market are wide ranging and very damaging.”
The KPMG research shows that, if the amount of illegal tobacco consumed in Australia in the last 12 months had been sold legally, it would have generated an extra $1.2 billion in tax revenue for the Australian Government.
“The Government itself is missing out and in a very significant way. While police and customs officials do what they can to catch these criminals, until a smarter approach to the responsible consumption of legal tobacco is adopted at a legislative level, the black market will flourish and criminals will continue to profit,” Mr Rogut said.
The awareness of illicit tobacco products is very high among small retailers, and both the perceived impact on business and the actual incidence of customers enquiring about purchasing illicit tobacco are cause for concern.
Research from leading international research company Roy Morgan released earlier in the year shows that 33% of small retailers reported customers enquiring about purchasing illicit tobacco since the introduction of plain packaging and 43% believe that the illicit trade of tobacco has negatively impacted their business.
CLICK HERE TO READ THE ILLICIT TOBACCO IN AUSTRALIA REPORT