The tobacco market includes both legal and illicit tobacco for sale. We estimate the size of the tobacco market at 9,392 tonnes in 2022–23, 37% lower than what it was six years ago. Over this period, increasing excise rates drove up the amount of tobacco duty paid. The duty paid reached $12.7 billion in 2022–23.
We estimate a further $2.7 billion of duty was evaded from illicit tobacco reaching the market. The Illicit Tobacco Task Force (ITTF), led by the Australian Border Force (ABF), work across several government agencies to combat this illicit tobacco marketExternal Link. Illicit tobacco includes international imports and domestically sourced tobacco. The ATO is responsible for excise duty payable on domestically grown and/or manufactured tobacco. ABF is responsible for the excise equivalent duty payable on imported tobacco and tobacco products.
Together in 2022–23, we seized the highest volume of illicit tobacco ever recorded. Despite these efforts and in contrast to a shrinking market, illicit tobacco is still increasing. We estimate approximately 18% (1,656 tonnes) of all tobacco for sale is illicit.
The duty value would have been $2.7 billion. This gives rise to a net tax gap of 14.3%.
- $2.3 billion duty was evaded through illicit importation
- $0.4 billion was evaded through illicit domestic production
We estimate a gross gap of 3,834 tonnes, or 33.1%. This is the amount of illicit tobacco that attempted to enter the Australian market. It includes the tobacco seized and the amount undetected that made it to market.
Note: Vapes, e-cigarettes and other similar items, including those containing nicotine, are not subject to excise duty and are not part of the tax gap estimate.
Table 1 shows the revenue impacts of these events over the last 7 years.
Element | 2016–17 | 2017–18 | 2018–19 | 2019–20 | 2020–21 | 2021–22 | 2022–23 |
|---|---|---|---|---|---|---|---|
Duty paid ($m) | 10,612 | 11,914 | 12,147 | 12,781 | 14,264 | 12,659 | 12,667 |
Gross gap – illicit tobacco attempted to enter the market($m) | 980 | 1,310 | 1,744 | 2,118 | 3,991 | 5,203 | 6,278 |
Seizures – Illicit tobacco seized before entering the market ($m) | 359 | 473 | 708 | 784 | 2,090 | 2,860 | 3,567 |
Net gap – undetected illicit tobacco that made it to market ($m) | 621 | 837 | 1,036 | 1,334 | 1,901 | 2,343 | 2,711 |
Potential tobacco market – all legally imported and attempted illicit tobacco supply in the absence of government intervention | 11,592 | 13,224 | 13,891 | 14,899 | 18,255 | 17,862 | 18,945 |
Net gap (%) | 5.4 | 6.3 | 7.5 | 9.0 | 10.4 | 13.1 | 14.3 |
Gross gap (%) | 8.5 | 9.9 | 12.6 | 14.2 | 21.9 | 29.1 | 33.1 |
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, 2016–17 to 2022–23