Jason Wood (La Trobe, Liberal Party) Share this | Hansard source

I would also like to congratulate the member for Hughes for being chair of the inquiry which looked into the need to investigate illicit tobacco. I rise today to speak on the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018, which delivers on the 2016-17 budget commitment to combat illicit tobacco and criminal activity which the Australian Taxation Office has identified as a major resource for organised crime. In talking about organised crime, I go back to my time at the organised crime squad in Victoria. Just prior to my arrival, there had been a major investigation into the selling of illicit tobacco. Back in those days, it was basically a 12-month operation. Victoria Police spent so much money on it but never had the legislative power to actually have a successful prosecution. So, at the state level over 15 years ago, law enforcement made the decision that it was not worth going after those involved in the movement of illicit tobacco, because the penalties simply weren't there. Why do people get involved in this? As the member for Hughes said, it's simply to save on tax or avoid paying tax.

On another inquiry I was on, the serious and organised crime inquiry, the committee visited a Customs office location in New South Wales. The Customs office had done a great service and seized pretty much a container load of counterfeit cigarettes. I asked, 'Do you let these run and pick up the guys involved?' They said, 'No; the AFP won't get involved and the Customs officers didn't want to get involved.' So, basically, they just forfeited the container. The organised crime groups were very much focused on the movement of illicit tobacco simply because, when it came to the courts, it wasn't viewed in the same terms as, say, trafficking heroin, and the money they made was quite incredible. They bring in a container load of cheap counterfeit cigarettes worth maybe $200,000 or $300,000, but, by the time they sell them on the black market, they make $3 million. The organised crime syndicates accept that maybe one of four containers would be seized by Customs but, even with the loss of $300,000, they can make in the vicinity of $10 million with the others containers.

The great news is that the Australian Border Force has, in the last two years, seized 400 tonnes of illegal tobacco and prosecuted 45 smugglers. I very much congratulate them on that. There is a focus on this because law enforcement realised that there's money to be made here by organised crime syndicates and that's the only reason they're involved. Yet, even though we've had this amazing success, organised crime syndicates are very much involved in this. Australia's current high tobacco costs are especially noticeable when compared to Asia, where cigarettes can retail for less than $2 a packet. I believe this poses a serious challenge to our law enforcement processes.

There are reports that the illicit tobacco market is increasingly linked to, and in some cases is even more profitable than, the narcotics trade—and this is true. I go back to a point I made before: if a container load of cigarettes comes in, the public view is that that poses a lot less danger than those who are trying to bring in, say, heroin or cocaine. The illegal trade involves a range of products, including loose-leaf tobacco, known as chop-chop, shisha tobacco, smoked in the Middle East, contraband in the form of stolen legally imported cigarettes, illegally imported foreign brands without Australian health warnings or any duty paid and counterfeit products with fake Australian packaging.

A report by KPMG revealed that 13.9 per cent of Australian total tobacco consumption, or 2.3 million kilos of tobacco, was estimated to be illicit. The same report found that the Australian government is losing $1.6 billion a year to the illegal tobacco industry. That money could be spent on hospitals and looking after the Australian people rather than going into the pockets of organised criminals. The former head of the government's illicit tobacco task force, and now-retired former Australian Federal Police officer, Rohan Pike estimates that the lost tax revenue figure is more like $4 billion.

We now have the situation where a huge range of brands and counterfeit imitations are being sold illegally by small grocery stores and individuals across the country. Recently, Jeff Rogut, from the Australasian Association of Convenience Stores, noted that criminals were taking advantage of cigarette legislation and said:

For too long, criminals have taken advantage of the gaps that exist around regulation of illegal tobacco, and have literally been driving trucks laden with contraband through those gaps. The trade is booming—and cigarettes have become the most valuable commodity for crime gangs. Our stores and our staff are victims of terrifying smash and grab robberies on a daily basis.

And we have seen that in Melbourne.

The bill will provide officers with access to tiered offences. By introducing tiered offences, prosecutors have more flexibility to bring charges against persons who have committed an illicit tobacco offence. The tiering of offences is based on the quantity of tobacco and is aimed directly at the commercial illicit tobacco market, rather than individuals buying small quantities for personal use. Strengthened penalties will provide a stronger disincentive for criminal behaviour. That is very true. Criminals realise that if legislation and penalties are weak they will go for the easy option, especially if it's going to give them great financial return. A person caught with five kilograms of illicit tobacco will now face a fine of up to $42,000. A person caught with 100 kilograms of illicit tobacco can face a penalty of up to $450,000 or five years imprisonment. I like the imprisonment, because obviously selling that amount they still make a fair whack of money from it. A person caught with 500 kilograms of illicit can face a penalty of over $2 million or 10 years in prison. So the penalties take into account the seriousness of the offence and provide a deterrent to illegal activities.

The bill also confirms that tobacco offences apply when the origin of the illicit tobacco cannot be established. From a law enforcement perspective, this addresses the current obstacle that where uncertainty arises it is very hard to know whether it is domestically grown or imported. It is a point of proof which prosecutions find very difficult to establish.

I also believe the bill will have further benefit in that it will improve the health of Australia. Smoking is one of the country's most preventable causes of death. There are an estimated 2.6 million smokers in Australia and the habit kills about 15,000 people every year. That's 15,000 reasons to reduce Australians' exposure to tobacco products. I was listening on the radio the other night where they had a cardiologist talking about the main way of preventing heart attack. He said, 'Give up smoking.'

This bill is clearly an important component of our government's suite of measures to discourage smoking. In the recent government submission to the tobacco inquiry, Cancer Council Australia referred to the high cost of tobacco as being 'the single most effective method available for reducing tobacco consumption, increasing attempts to quit and reducing smoking prevalence, thereby reducing death and disease caused by smoking.' If we look at this from the point of view of the cost to the taxpayer, more than $30 billion is estimated to be spent each year on health, social and economic costs related to smoking.

Illicit tobacco also creates a different picture around Australia's smoking rates. According to the most recent Australian Bureau of Statistics national health survey, adult smoking rates fell from 16.1 per cent in 2011-12 to 14.5 per cent in 2014-2015. The National Drug Strategy household survey shows a similar decline. But the Australian Criminal Intelligence Commission's annual national wastewater survey, in which households' waste is tested for the presence of various drugs, tells a different story. Law enforcement agencies consider it more reliable because it's hard to hide what's in your urine. The commission's report issued in July last year from testing conducted over a six month period shows tobacco use nationally going up, not down. So obviously we're talking about illegal tobacco now. That means there's no room for complacency and greater urgency to implement this bill as further measures to discourage smoking.

The amendments in this bill as a whole will ensure there is a comprehensive set of offences aimed at stopping the importation, possession, purchase, sale and production of illicit tobacco. In addition, the bill makes it an offence to possess equipment used in the production of illicit tobacco—again, a very important tool for law enforcement. Police may not actually come up with the illegal tobacco, but if they get the equipment they can then seize that and charge people.

These changes are supported by the Minister for Home Affairs, who is doing a fantastic job. He will later introduce legislation to amend the Customs Act to strengthen illicit tobacco offences, which will complement the amendments contained within this bill. I therefore commend this bill to the House.

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