Tobacco Stakeholder Group record of meeting, October 2014

Meeting details

Venue: ATO Office, 52 Goulburn Street, Sydney

Date: 23 October 2014

Start: 10.00am Finish: 2.00pm

Chair: Tom Wheeler

Secretariat: Rowena Troth

Contact Phone: (02) 4923 1444


Tom Wheeler


Andrew McIver


Wayne Barford


Sam Simpson


Matthew Stevens


Bryce Conolan


Janaka Seneviratne


Lloyd Weedall

Department of Health

Neville Matthew


Barry Wilson

British American Tobacco Australia Ltd (BATA)

Benjamin Chew

British American Tobacco Australia Ltd (BATA)

Errol McMahon

Imperial Tobacco Australia

Gary Dickson

Imperial Tobacco Australia

Rodney Kretchmer

Philip Morris Limited

Mark Powell

Philip Morris Limited

Chris Argent

Philip Morris Limited

Guest Attendee:

Sean McGill

KPMG (Agenda Item 3)


Lachlan Beaton

British American Tobacco Ltd (BATA)

Michelle Park

Imperial Tobacco Australia

Anthony Millgate

Department of Health

Sasha Billett


Discussion Summary


The Tobacco Stakeholder Group agendas, minutes and related papers are not binding on the ATO, ACBPS or the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

Agenda Item 1 - Welcome

Introductions, review of action items and previous minutes.

Outcome: The minutes of the previous meeting of April 2014 were endorsed, and all action items closed. No conflicts of interest were declared by members.

Tom advised that a new draft charter (Statement of Intent) will be circulated shortly in line with streamlining ATO corporate and reference documents. The Statement of Intent will describe the Forum's intent of being an important consultation forum to engage with industry on significant issues around how we administer the law, and in assessing risks and working together to resolve risks.

Agenda Item 2 - Agency updates

2.1 Australian Taxation Office (ATO)

  • Update on compliance activities
  • Update on September tobacco duty increase
  • Update regarding modernising the Excise system

2.2 Australian Customs and Border Protection Service (ACBPS)

  • Six monthly update on illicit tobacco

2.3 Department of Health

  • Protocol on illicit trade update
  • Plain Packaging update - compliance and enforcement

Outcome: All agencies provided updates on current work.


Compliance activities

Sam Simpson provided an overview of 2014-15 compliance action, including

  • A cross-agency taskforce including AFP, ACBPS and ATO are looking at intelligence to potentially identify persons in local manufacture, growing and importing of illicit tobacco for appropriate response.
  • Progress of Operation Garnet and likely referrals of cases to the Commonwealth Director of Public Prosecutions.
  • Ongoing work with law enforcement with intelligence around crops and also working with industry.
  • A biannual covert buy process.

Members were reminded to contact their Relationship Managers (RMs) if they wish to pass on information to ATO investigations and enforcement staff.

September tobacco duty increase

Andrew McIver provided an overview of the recent indexation of tobacco duty on 1 September 2014, and the setting of tobacco quotas in the preceding period.

On this occasion, rather than imposing quotas when clearance levels elevated, contact was made with companies to advise the ATO could take those clearances into account and reduce the quota amount provided to them.

Contact with companies provided an opportunity to hear industry views on the factors that should be taken into account, before the ATO set the quota amounts. This reduced subsequent workflow for both sides in actioning requests for variation. The early engagement was considered a successful outcome, and it is expected future processes will be along similar lines.

Modernising the Excise system

Tom Wheeler provided an update on ideas to modernise the excise system. It was noted that industry had previously provided feedback on areas for streamlining, red tape reduction and deregulation. These submissions were being considered and any concerns further analysed.

Industry, while expressing some concerns, believed reform is beneficial, particularly in relation to streamlining the processes in administration and licensing. Industry raised drawbacks as an irritant. ACBPS are aware of the issue.

Further updates are expected towards the end of 2014.


Organisational change

Matt Stevens provided an update of the reform process of the ACBPS. The Department of Immigration and ACBPS are being amalgamated with two separate functions - operational and policy. The Department will operate on a regional command model. Bryce Conolan provided information about the various Divisions and advised that illicit tobacco is still a priority for the agency. We have recently seen the first imprisonment for tobacco smuggling and it is expected that over the next 12 months, there will be more prosecution outcomes.


The ACBPS was not able to provide specific information about several of its investigations, including regarding international mail. ACBPS welcomed any relevant intelligence from industry.

Janaka Seneviratne provided a copy of the regular six-monthly Customs report - "Illicit Cigarette and Tobacco Detection Summary - January to June 2014". Key findings include:

  • Sydney continues to be the main detection point; and
  • UAE continued to be the main source country for illegal molasses, however this has changed in the last three months to Lebanon.

Department of Health

Lloyd Weedall provided an update on the Protocol on Illicit Trade. The Protocol was open for signature from 10 January2013 to 9 January 2014. Australia is no longer able to sign it but it can accede. 54 parties have signed, with four parties having ratified as at 30 October 2014. Lloyd also advised that timeframes on the Regulation Impact Statement are not known at this stage as the Department is still awaiting input.

Lloyd Weedall also provided an update on Tobacco Plain Packaging:

  • The Department has received more than 130 complaints re non-compliance;
  • The National Measurement Institute (NMI) carry out inspections and educational visits. For 2013/14, they carried out 960 educational visits;
  • As reported in the 2013/14 Department of Health Annual Report, there were 59 alleged contraventions of the Act which were investigated; and
  • The Department is in the process of producing a supplement guide to the information kit on non-standard products (eg cigars, pipe tobacco, etc) which is expected to be printed and distributed in November.

Agenda Item 3 - Industry Items

  • KPMG Report on "Illicit Tobacco in Australia" (under embargo background briefing)
  • Industry updates

Outcome: All industry representatives provided updates on current work / issues.

Sean McGill from KPMG London provided an overview of the soon to be released report on "Illicit Tobacco in Australia". The report was prepared by KPMG in the UK on behalf of the tobacco industry and has used consistent methodologies in the collection of data to report on illicit tobacco in Australia.

Barry Wilson circulated a report to members on the BATA covert purchase program. Industry also noted an observation that the average price of illicit tobacco has increased from $9 - $10 per pack to around $11 - $12 per pack.

Wayne Barford raised the potential for industry to cut off supply of legal product to a trader they have been found to be selling illegal product. Legal impediments through the Trade Practices Act were flagged, as well as non-standardised permits system across States and Territories. It was suggested that further work would be done on a model for a unified industry response along the lines of the three step process of inspection, reinspect, penalise.

Action: 231014-3-1 - Australian Government agencies will continue to collaborate on the enforcement options for dealing with illicit tobacco.

Barry Wilson provided an update of Law Enforcement Activity reported in the media over the last 12 months.

Bryce Conolan provided a brief update on the Trusted Trader Program being implemented by ACBPS - expected to commence by 1 July 2015.

Agenda Item 4 - Other Business

There was no other business.

The meeting closed at 12.20pm.

    Last modified: 19 Feb 2015QC 44296