Writes Simon Chapman, Professor of Public Health at Sydney University  1/3/11 responding to a tobacco industry-commissioned report on illicit trade...

The tobacco industry knows on which side its bread is buttered, and over the years, its regular squealing about tax rises have told us all that tax increases cause painful falls in tobacco consumption – precisely the point! Cigarette prices have an elasticity of around -0.4, meaning that a 10% in retail price rises cause a 4% fall in overall consumption, caused by both quitting and reducing use. Low income groups like children and the poor have even higher responsiveness to price rises, with elasticities of up to -1.2 (12% fall for 10% price rise).

The 2010 Rudd government excise rise was one of the biggest on record and roundly applauded by public health groups. The tobacco industry has shifted its main attack on tax rises from being a concerned friend to the poor (“prices rises hurt the poor .. so keep the price low!”) to the idea that they generate significant black markets.

This week, an industry-commissioned Deloitte report has trumped another industry-commissioned 2010 PriceWaterhouseCoopers report on the size of the illegal tobacco market in Australia.  In 2010, PWC estimated this at 12.3% of all tobacco then consumed in Australia: that’s right, get your heads around this one: 1 in 8 cigarettes and roll-your-owns are purchased illegally, the want us to believe!

Globally, an upper limit of 8.5% of tobacco sold is estimated to be black market, with most of this occuring in nations with high corruption indexes like much of Africa and former Soviet states. Our local  tobacco industry is saying that Australia is near the top of that league. Who would have thought!

Now Deloitte has gone one better: To quote the release “A Deloitte report into illegal tobacco in Australia revealed taxpayers are losing out on almost $1.1 billion in excise revenue as the illegal tobacco market grows rapidly. The report estimated that 2.68 million kilograms of illegal tobacco products were sold in Australia during 2010, equivalent to 15.9% of the total legal tobacco market. Organised crime gangs importing loose leaf tobacco, counterfeit and contraband cigarettes are now the fourth largest tobacco player in Australia just behind Imperial Tobacco which holds 17% of the legal market. British American Tobacco spokesperson, Scott McIntyre said the annual report highlighted the worrying upward trend in black market tobacco which pays no excise duty to the Government, is unregulated and often carries no health warnings.”

Contrast these findings of the 2007 National Drug Household Survey which found that only 0.2% of the population (around 33,000 people) used blackmarket tobacco more than half the time. The tobacco industry continues to blow self-serving smoke.  

Try and picture this: unlike the Federal police who are charged with busting those who sell illegal tobacco and have in the past made arrests that have seen fines running into the millions, masses of ordinary smokers are apparently somehow able to do a better job in finding out where these all these illegal outlets are.   

Look at all the legal cigarette packs that you see in 1,000s of legal outlets .. divide that by 6 and imagine that that is approx the number of outlets that these industry sponsored reports would have us believe are out there.