2023–24 tobacco tax gap estimate
The tobacco market includes both legal and illicit tobacco for sale. We estimate the total size of the tobacco market at 7,104 tonnes in 2023–24, 43% lower than what it was in 2018-19. Using our traditional methodology, we estimate that 1,741 tonnes of illicit tobacco was consumed in the 2023-24 year. This represents $3.2 billion of combined customs and excise duty theoretically payable that has been evaded.
The Illicit Tobacco Taskforce (ITTF or taskforce), led by the Australian Border Force (ABF), works across several government agencies to combat the illicit tobacco marketExternal Link. Illicit tobacco includes international imports and domestically sourced tobacco. ABF is responsible for the excise equivalent customs duty payable on imported tobacco and tobacco products. The ATO is responsible for excise duty payable on domestically grown or manufactured tobacco (or both).
Despite the efforts of the taskforce, illicit tobacco is still increasing. We estimate approximately 25% (1,741 tonnes) of all tobacco for sale in the 2023-24 year was illicit.
The combined duty value would have been $3.2 billion. This gives rise to a net tax gap of 19.6%. Of the $3.2 billion, we estimate that:
- $2.9 billion customs duty (90%) was evaded through illicit importation
- $0.3 billion excise duty (10%) was evaded through illicit domestic production.
We estimate a gross gap of 3,505 tonnes, or 39.5%. This is the amount of illicit tobacco that attempted to enter the Australian market. It includes the tobacco seized and the amount undetected that made it to market.
Note: Vapes, e-cigarettes and other similar items, including those containing nicotine, are not subject to excise and excise equivalent customs duty and are not part of the tax gap estimate.
Table 1 shows the revenue impacts of these events over the last 6 years.
|
Element |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
2023-24 |
|---|---|---|---|---|---|---|
|
Duty paid ($m) |
12,147 |
12,781 |
14,264 |
12,659 |
12,667 |
9,812 |
|
Gross gap – illicit tobacco attempted to enter the market($m) |
1,744 |
2,118 |
3,991 |
5,203 |
6,278 |
6,411 |
|
Seizures – illicit tobacco seized before entering the market ($m) |
708 |
784 |
2,090 |
2,860 |
3,567 |
3,226 |
|
Net gap – undetected illicit tobacco that made it to market ($m) |
1,036 |
1,334 |
1,901 |
2,343 |
2,711 |
3,185 |
|
Potential tobacco market – all legally imported and attempted illicit tobacco supply in the absence of government intervention |
13,891 |
14,899 |
18,255 |
17,862 |
18,945 |
16,223 |
|
Net gap (%) |
7.5 |
9.0 |
10.4 |
13.1 |
14.3 |
19.6 |
|
Gross gap (%) |
12.6 |
14.2 |
21.9 |
29.1 |
33.1 |
39.5 |
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, 2018–19 to 2023–24
Consistent with prior years estimates published by the ATO, this estimate uses a channel-based bottom-up method. Recent data suggests that this methodology underestimates the size of the tobacco market and as a result the methodology is under review. See Reliability of the tobacco tax gap estimate for further information. This published estimate helps retain the existing time series of the current method, but the ATO is working with the recently-established office of the Illicit Tobacco and E-cigarette Commissioner who are providing more comprehensive and consistent reporting on the size of both the illicit tobacco and e-cigarette markets, and estimates of excise and excise equivalent customs duty evaded.
For previously published tax gap figures, see our Australian Tax Gaps - Data.gov.auExternal Link