Tobacco Asia

22 tobaccoasia Issue 3, 2026 May / June multibillion-dollar industry that may account for up to half of all tobacco sales in Australia, high- lighting the enormous scale of the illicit economy. For organized crime groups, the opportunity is clear: a high-demand product, exceptionally high legal prices, and a steady stream of consumers will- ing to buy cheaper alternatives is worth every risk. Organized crime moves in The illicit tobacco trade has increasingly attracted organized crime networks operating across Asia- Pacific supply chains. According to a spokesper- son for Japan Tobacco International (JTI), the illegal trade has become a global criminal enter- prise. "The illicit tobacco trade deprives govern- ments worldwide of up to US$50 billion a year," the spokesperson told Tobacco Asia in a recent interview. "[The illegal trade] cost Australia A$4 billion [US$2.8 billion] in 2023–2024 through lost tax revenue, healthcare costs and reduced produc- tivity, according to Australian law-enforcement agencies." The growth of the black market has also been linked to violent crime. "Australian Criminal In- telligence Commission investigations have linked criminal syndicates to more than 200 fire bomb- ings and at least three homicides since 2023," the spokesperson said, adding that the trade has also been associated with widespread intimidation and extortion. What began as tax evasion has therefore evolved into a broader criminal ecosystem. The global supply chain of "illicit whites" Much of the tobacco entering Australia belongs to a category known as "illicit whites." These are cigarettes legally manufactured in certain coun- tries but produced primarily for smuggling into high-tax markets. Major production hubs include China, Vietnam, Cambodia, Indonesia, and the UAE. Because they are produced outside the of- ficial distribution channels of major tobacco com- panies, these brands can be exported cheaply and distributed through illicit networks. For criminal groups, this system offers enormous profit poten- tial. A shipment purchased cheaply overseas can yield millions of dollars once sold on Australia's black market. Falling legal sales and tax revenues The illicit boom is also affecting government fi- nances. Australian Treasury projections show a sharp drop in tobacco excise revenues as legal sales decline. Current estimates suggest tobacco excise will generate A$22.3 billion (US$15.6 billion) over the four years of 2026 to 2028, down dramatically from the A$44.9 billion (US$31.3 billion) forecast only two years earlier. Former Australian Border Force tobacco strike force head Rohan Pike believes the trend is alarming. "The momentum is downward, and it's just a matter of how quickly we get to ground zero," Pike said in a recent statement to the press. "It's going to be a negligible number in the years to come." Meanwhile, economist Chris Richard- son offered a similarly stark warning. "This may be the biggest unforced error in Australian economic policy in a very, very long time," Richardson said. "We are seeing the death of the legal tobacco mar- ket in Australia." Government rejects tax cuts Despite these warnings, the Australian govern- ment has resisted calls to lower tobacco taxes. Treasurer Jim Chalmers has dismissed suggestions that reducing excise could weaken the illicit trade. "We don't believe a tobacco tax cut will fix the problem," Chalmers said when responding tax cut proposals. And public health officials have expressed concern that lowering cigarette prices could reverse decades of progress in reducing smoking rates. But, critics argue that maintaining extremely high prices without sufficient enforce- ment may simply strengthen the black market even further than it already is. Law enforcement on the front lines Australia's enforcement response involves several agencies. The Australian Border Force (ABF), sup- ported by the ABF-led Illicit Tobacco Task Force (ITTF) and federal and state police, is responsible for detecting and disrupting illicit tobacco ship- The ABF uncovered an illegal tobacco distribution operation in Townsville, a Sydney suburb; February 2026. Credit: ABF "The illicit tobacco trade deprives governments worldwide of up to US$50 billion a year."

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