The Australian government has confirmed that it will maintain its high tobacco excise taxes, despite increasing concerns that these elevated prices are contributing to a rise in the black market for cigarettes.
The country’s tobacco tax system, which has pushed cigarette prices to some of the highest levels globally, is not expected to change.
While illegal tobacco sales are on the rise, the government has opted to continue its current tax policies.
According to 7News, experts suggest that the growing gap between legal and illegal tobacco prices is fueling the expansion of illicit trade, further complicating efforts to curb smoking rates.
High Tobacco Taxes and Their Impact on Cigarette Prices
In March 2025, the federal excise on cigarettes topped $1.40 per cigarette, excluding shop mark-ups, pushing the average pack of 20 cigarettes to cost around $40.
These prices are among the highest globally and have been a key factor in reducing smoking rates in the country.
Calls for a reduction in tobacco excise taxes have grown, with some arguing that lower prices would reduce the demand for illegal tobacco.
NSW Premier Chris Minns has suggested that lowering cigarette prices might help curb the surging levels of untaxed tobacco products circulating in the community.
Treasurer’s Stand: No Change to the Excise Tax
Despite these suggestions, Treasurer Jim Chalmers has dismissed the idea of lowering the excise.
He emphasized that the decrease in tobacco tax revenue, from $16.3 billion in 2019-20 to a projected $7.4 billion this year, is due to both positive and negative factors.
While fewer people are smoking, the rise in black market tobacco is impacting revenue.
Chalmers added:
“More people are giving up the darts, but more people are also doing the wrong thing (and) I’m not convinced cutting the excise on cigarettes would mean that would be the end of illegal activity.”
He further stated,
“I respectfully disagree with Chris … I don’t think the answer here is to make cigarettes cheaper for people, the answer here is to get better at compliance.”
Illegal Tobacco and Its Growing Presence in Australia
The surge in illegal tobacco sales has led to increased scrutiny by law enforcement. Police recently announced the arrest of seven individuals connected to the importation of 20 million untaxed cigarettes and other drug imports.
This reflects the growing challenge posed by the illicit tobacco market, which undermines government tax efforts.
While critics like Minns argue for policy changes, Chalmers maintains that improving enforcement and compliance measures is the key solution. NSW Treasurer Daniel Mookhey also pointed out:
“We can’t ignore the fact there’s an interaction between the federal exercise and the emergence of illegal tobacco.”
The debate continues over how to effectively combat the black market without undermining the government’s efforts to reduce smoking rates.
