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Illegal tobacco costing $600m a year | News.com.au

THE illegal tobacco industry, increasingly moving from locally produced tobacco to smuggled cigarettes, is costing the nation $600 million a year in lost revenue, a new study says.

The study, commissioned by British American Tobacco and conducted by consultants PriceWaterhouseCoopers (PWC), says more than 12 per cent of all tobacco consumed in Australia is illegal and thus escapes excise.
Illegal tobacco is also unhealthier than legal tobacco, it said.

"This is due to the fact that that illegal tobacco typically contains a number of contaminants and is not subject to quality control standards that legal tobacco production adheres to," it said.

The study estimated smokers consumed 2.3 million kilograms of illegal tobacco in 2008-09, representing a $624 million loss to the revenue.

The anti-smoking group Action on Smoking and Health (ASH) was wholly unsympathetic.

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ASH chief executive Anne Jones said this was all part of a global scare campaign by the tobacco industry.

"They are trying to counter any government increase in tobacco tax by saying there's going to be this massive increase in smuggling so you shouldn't do it," she said.

"If we put the tax up on tobacco, we will see immediate decline in consumption, we will see an immediate decline in the takeup of smoking by children. It will be even more effective if they then use some of that tax to pay for the urgently needed national preventative health strategy."

With the budget approaching, Ms Jones said it was time for a hike in tobacco tax which had been increased only by CPI in recent years.

"The percentage of tax in Australia on tobacco is quite low compared to many other OECD countries. It's around about 69 per cent of the retail price," she said.

The PWC study, the latest in a series conducted every two years, acknowledged that tax on tobacco in Australia was lower than most OECD countries.

But it still generated total revenues of $9.3 billion in 2008, contributing $3.6 billion to Australia's GDP.

The study said avoiding tax was what drove illegal tobacco sales, including domestically grown tobacco known as "chop chop", cigarettes smuggled into Australia from sources countries such as China and legitimate cigarettes on which excise had been evaded.

British American Tobacco Australia head of communications Louise Warburton said agencies were clamping down on the supply of illegal tobacco.

"Yet clearly demand remains high and with more than 70 per cent of the cost of a cigarette going to the federal government in excise, it is no wonder that criminals are turning to illegal tobacco to make a profit," she said.

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