The tobacco market includes both legal and illicit tobacco. We estimate it has contracted 34% since 2015–16.
Over this period, increasing excise rates drove up the amount of tobacco duty collected. The total collected reached $14.3 billion in 2020–21. We estimate a further $1.9 billion was evaded from illicit tobacco reaching the market.
Led by the Australian Border Force (ABF), we work with several government agencies to combat this illicit tobacco marketExternal Link. Illicit tobacco includes international imports and domestically sourced tobacco. The ATO is responsible for excise duty payable on domestically grown and/or manufactured tobacco. ABF is responsible for the excise equivalent duty payable on imported tobacco and tobacco products.
Together in 2020–21, we seized the highest amount of illicit tobacco ever recorded. Despite these efforts and in contrast to a shrinking market, illicit tobacco is increasing and has doubled to over 10% of the market.
For 2020–21 we estimate a net gap of 1,234 tonnes. This is the amount of illicit tobacco undetected in the Australian market. The duty value is $1.89 billion:
- $1.6 billion duty was evaded through illicit importation
- $0.29 billion was evaded through illicit domestic production
We estimate a gross gap of 2,599 tonnes. This is the amount of illicit tobacco that attempted to enter the Australian market. It includes the tobacco seized and the amount undetected that made it to market.
Note: Vapes, e-cigarettes and other similar items, including those containing nicotine, are not subject to excise duty and are not part of the tax gap estimate.
Table 1 shows the revenue impacts of these events over the last 6 years.
|
Element |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
|---|---|---|---|---|---|---|
|
Duty paid ($m) |
9,928 |
10,612 |
11,914 |
12,147 |
12,781 |
14,264 |
|
Gross gap – illicit tobacco attempted to enter the market |
655 |
980 |
1,310 |
1,744 |
2,127 |
3,981 |
|
Seizures – Illicit tobacco seized before entering the market ($m) |
135 |
359 |
473 |
708 |
796 |
2,090 |
|
Net gap – undetected illicit tobacco that made it to market ($m) |
520 |
621 |
837 |
1,036 |
1,331 |
1,891 |
|
Potential tobacco market – all legally imported and attempted illicit tobacco supply in the absence of government intervention |
10,583 |
11,592 |
13,224 |
13,891 |
14,908 |
18,245 |
|
Net gap (%) |
4.9 |
5.4 |
6.3 |
7.5 |
8.9 |
10.4 |
|
Gross gap (%) |
6.2 |
8.5 |
9.9 |
12.6 |
14.3 |
21.8 |
Figure 1 shows the gross and net gap in percentage terms, as outlined in Table 1.
Figure 1: Gross and net tobacco tax gap percentages, 2015–16 to 2020–21