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MELBOURNE: Australia is learning the hard way that strict enforcement alone cannot stop the growing number of smokers turning to the black market for tobacco, the Retail and Trade Brand Advocacy (RTBA) said today.
The comments from RTBA, an international non-governmental organization that aims to safeguard supply chains and brands from criminal conduct, came after a report by Australia’s Joint Parliamentary Committee on Law Enforcement in the Illicit Tobacco Market .
The committee recognized that Australia’s approach to tobacco control, which focuses on price-based policies, has been counterproductive, as there are now increasing numbers of people turning to illegal products as cheaper alternatives to legal cigarettes. .
An explanatory memorandum to the 2018 legislative amendment stated that the higher excise and excise duty equivalent rates for tobacco after the 2016-17 and 2017-18 budget measures have significantly increased the risk of produces or imports illicit tobacco in Australia. The black market for tobacco in Australia has grown exponentially in recent years. In 2018-2019, a total of 633 tons of illicit tobacco were seized, a historic record.
Also in the Report, law enforcement agencies such as the Australian Police Federation agreed that high excise duty rates on tobacco products drive demand for cheaper alternatives. Therefore, opportunistic entrepreneurs, in this case criminal organizations, will be incentivized to engage in this high-profit business.
Health Michael, Managing Director of RTBA, said: “This Joint Committee Report provides the Malaysian government with strategic insights to address the black market for tobacco, in which Malaysia currently leads the world with illegal cigarettes occupying 64.5% of the market total.
“The Malaysian government has taken the necessary step to curb the tobacco black market problem with several law enforcement-based initiatives announced in Budget 2021. These efforts, including the crackdown on transshipment abuse, indicate a determination to take actions.
“However, RTBA is convinced that these measures would not be sufficient to reduce the incidence of illegal cigarettes significantly.
“Criminal unions are very adept at circumventing enforcement efforts. If there is a will, there is a way. We anticipate that these criminals will quickly move to another channel to smuggle cigarettes into Malaysia and re-export them to other countries.
“In order to really make a dent in stopping the black market for tobacco, RTBA recommends removing the will to operate from these unions. This can only be achieved by closing the price gap between legal and illegal products, which can reach a factor of 3 to 4 in Malaysia, ”added Heath.
He also said that there are many ways to address the illegal versus legal price gap, including strategies such as introducing products at prices targeting black market consumers, that have worked in some countries.
“To arrive at an optimal solution that addresses both the supply and demand aspects of the black market for tobacco requires logic and innovative thinking. Ultimately, all Malaysians want to achieve the goals of the national health agenda and be protected from the negative impact of the illegal cigarette trade, ”Heath concluded.
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