Tuesday, 14 August 2018
Customs Amendment (Illicit Tobacco Offences) Bill 2018; Second Reading
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House notes that the Turnbull Government's return to surplus in 2019-20 is reliant on a one-off tobacco tax collection timing trick".
I rise to speak on the Customs Amendment (Illicit Tobacco Offences) Bill 2018. This piece of legislation, together with the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018, provides a new framework for strengthening illicit tobacco offences by removing existing obstacles to prosecution. The Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018 is currently before the Senate, and Labor has agreed to support that bill, as I outlined in this place on the 28 February. Naturally Labor will support the bill currently before the House, because we believe in cracking down on illicit tobacco as well as eliminating smoking related illness and death. Illicit tobacco refers to tobacco sold to Australian consumers without the payment of relevant taxes. There are several types of illicit tobacco, including contraband, which is manufactured legally outside of Australia and smuggled into the country; counterfeit, which is manufactured illegally without permissions and smuggled into Australia; and unbranded tobacco, which usually comes in loose leaf and is known colloquially as chop-chop. I suppose the Australian public would know that one more than the others.
The report Illicit tobacco in Australia released on 20 April this year by KPMG states that Australian tobacco consumption for the 2017 calendar year was 15.6 million kilograms, and around 15 per cent of this, or 2.3 million kilograms, was illicit tobacco. According to the report, the illicit tobacco consumed would have had an estimated excise value of $1.91 billion if it had been consumed legally. There are, however, other estimates of this figure because measuring the illicit tobacco market is, naturally, inherently difficult. The Department of Home Affairs has estimated the excise value at between $0.5 billion and $2.3 billion, whilst others have estimated the cost to the Australian public purse to be up to $6 billion. Regardless of this figure, as illicit tobacco enters the market, lost excise normally charged as a tax or duty is not being collected by the Australian government to be spent on other services such as health, infrastructure, education et cetera for our society and our community.
Last week two students in Sydney's north were arrested after attempting to import 778 kilograms of loose-leaf tobacco sent as sea cargo from China, with the excise for this shipment alone estimated to be worth more than $780,000. I commend the Australian Border Force officers for intercepting this shipment in Adelaide last month and for the daily work they do in protecting our borders. Another such instance uncovered by Australian Border Force officials was an alleged Chinese syndicate smuggling into Australia tobacco and cigarettes hidden in children's toys. There are other instances I could outline to the House. For example, six tonnes of illegal tobacco leaves and vast fields of mature plants worth more than $13 million in excise were seized in a raid on a rural property in the Northern Territory in July. The media has reported these events on numerous occasions.
I have heard from my own constituents and from small business operators in my electorate of Blair in South-East Queensland stories about businesses being undercut by those purportedly selling illicit tobacco to sometimes unknowing customers who think they're just getting cheaper cigarettes and cheaper tobacco. In Queensland, as recently as Saturday, The Queensland Times reported that a local store in Ipswich in my electorate was selling 50 grams of loose-leaf tobacco for just $20, compared to $69 in the supermarket. Illicit tobacco may seem harmless, but purchasing it actually helps fund the criminal networks that run these operations. They use illicit tobacco as one of the many branches of their criminal operations, which include such things as human trafficking, people smuggling, illicit use of firearms and drug smuggling. People who innocently buy tobacco on the cheap from local shops may be surprised to find out they may be partaking of this illicit tobacco trade. They're actually funding these operations by buying chop-chop.
We must take every step possible to crack down on illicit tobacco and the people who run these illegal operations. Since 1 July 2015, over 114 people have been charged with tobacco related border offences. However, only 69 of those charged have been successfully prosecuted under the Customs Act. There are a number of limitations with the existing tobacco related revenue evasion offences in the Customs Act and the Excise Act because the offences are inconsistent. The Customs Act offences only apply when knowledge of defrauding or intention to defraud revenue can be proven. By comparison, the Excise Act offences are associated with relatively low penalties and do not provide a sufficient deterrent to those dealing in illicit tobacco. Events can only be successfully prosecuted if it can be proven whether tobacco was imported or produced domestically. Because of these inconsistencies, neither officers of customs, who administer the Customs Act, nor officers of the Australian Taxation Office, who administer the Excise Act, are currently able to target the full range of illicit tobacco offences.
The bill before the House amends the Customs Act 1901 to create two new offences in respect of importing illicit tobacco based on recklessness and ensures customs officers can investigate and enforce new illicit tobacco offences relating to the proof of origin in the Taxation Administration Act 1953. In addition to this, there are paragraphs that create new offences which lower the standard of proof from intention to defraud or knowledge of defrauding revenue to recklessness. Recklessness is a lower standard of culpability than intention or knowledge. With these amendments, customs officers will be able to target a wider range of participants in the illegal tobacco trade and strengthen the illicit tobacco enforcement regime in Australia. In turn, this will allow greater opportunities for successful prosecution of those involved in the illicit tobacco market.
The bill also proposes to extend the power to arrest without warrant under section 210 of the Customs Act if an officer of customs or police believes on reasonable grounds the person has committed or is committing an offence. Labor supports this. It should be noted, however, that the power of arrest without a warrant can only be exercised if an officer believes on reasonable grounds that proceedings by summons against a person would not achieve one or more of the several purposes set out in the Customs Act. It's appropriate for the power to arrest without warrant to be extended to prevent the continuation of illicit tobacco offences and to ensure that people appear before the court in relation to those offences.
Whilst we welcome the measure to combat illicit tobacco, we on this side of the House are always prepared to hold this out-of-touch Turnbull government to account. As I referred to in my second reading amendment, the Turnbull government is relying on a one-off tobacco tax collection timing trick to help them bring up a budget surplus. In the 2018-19 budget, the Turnbull government miraculously announced that they were going to achieve surplus in 2019-20, a year earlier than previously anticipated.
Currently, importers who import tobacco are required to pay duty when the tobacco leaves a warehouse. As a result of this, there have been instances of tobacco being removed from warehouses without duty being paid, resulting in the illicit tobacco entering the Australian supply chain. In an effort to combat this, from 1 July 2019 importers will be required to pay all duty and tax liability when tobacco enters the country rather than when it leaves a licensed warehouse and enters the domestic market.
As a result of this measure, the Turnbull government announced a transitional measure, with importers having 12 months to pay tax on tobacco stored in warehouses. This means that, instead of duty being collected in the latter years, when it leaves a warehouse the revenue of over $3 billion will be collected in the 2019-20 financial year—a timing trick perpetrated to achieve a budget surplus. The 2019-20 financial year is also the year in which the Turnbull government says it will reach a $2.2 billion surplus—a $2.2 billion surplus and a $3 billion timing trick to achieve it. The Turnbull government is using the risk of illicit tobacco entering the market to reach a surplus a year earlier than they previously anticipated or expected to announce it. It is clear that, without this one-off tobacco tax collection timing trick, the Turnbull government would not be able to achieve a surplus in 2019-20 as they claim they will. I note that this measure will require another piece of legislation, currently titled the Customs Amendment (Collecting Tobacco Duties at the Border) Bill in the legislation proposed to be introduced in the spring sittings, as circulated by the Department of the Prime Minister and Cabinet.
Labor is awaiting this legislation to be introduced in the House and the government's further admission that without this additional revenue they will not be able to achieve a surplus one year ahead of schedule. Of course Labor have supported measures before the House when we've seen better and more improved economic reforms to pay down Australia's debt and to ensure bigger surpluses and a fair and sustainable taxation system for all Australians. For example, this plan from our side of the chamber involves capital gains tax reforms and reforms in relation to excessive dividend imputation credits, which crack down on an unsustainable tax loophole that gives tax refunds to people who don't actually pay income tax.
Labor has made a strong commitment historically in relation to getting rid of the scourge of smoking. Smoking accounts for 15,000 deaths every year in this country. Policy reforms implemented by former Labor governments made significant advancements towards drastically reducing that number—for example, what Australia did under the last Labor government in becoming the first country in the world to introduce plain packaging for cigarettes. We also increased the excise rate applying to tobacco products by 25 per cent as part of our budget, and we commend the government for mimicking what we had to do. We invested money—for example, $61 million in a national tobacco campaign. We introduced legislation to bring restrictions on internet advertising of tobacco products into line with advertising on other media. We took a strong, principled stance.
Unfortunately, there are parties on the other side of the chamber who have been shamelessly accepting donations from big tobacco. The latest records from the Australian Electoral Commission show that the National Party accepted $15,700 in donations from the tobacco industry in the 2016-17 financial year. This is simply not good enough. It's not good enough to say one thing in this chamber, to say one thing about the tobacco scourge and reducing deaths and illness in relation to tobacco related illness in this country, but to do another thing in Canberra or organisationally in your party. We don't think that's good enough.
I think the Prime Minister should explain why it's acceptable for his coalition partners to fill their coffers with donations from the tobacco industry. On this side of the chamber we've consistently shown our commitment to policies to reduce the instances of tobacco related illness and disease in this country. We support the passage of this bill through the House to stop the scourge of illicit tobacco and ultimately improve health outcomes for all Australians. I commend the legislation and the amendment to the chamber.
I thank the member for Lingiari. The original question was that this bill be now read a second time. To this the honourable member for Blair has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I'll state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to.
The Customs Amendment (Illicit Tobacco Offences) Bill 2018, with measures making policing of the market in illicit tobacco more fit for purpose, is a very important part of the long-running, largely bipartisan effort to reduce the human and dollar costs of smoking. These costs come in at around 15,000 lives and $30 billion in health services on an annual basis, and we can add to that a recent and rapidly increasing loss of revenue from the surging black market in illicit tobacco. These are enormous costs, and governments at all levels—federal, state and local—have been working to reduce them since the mid-1990s—with considerable success, I might add.
As recently as the mid-1990s, almost one-quarter of all Australian adults smoked. That is now down to about 13 per cent, with the trend suggesting it can and will be driven considerably lower, saving lives and billions of dollars, in what has been a remarkable policy turnaround spaced over several decades. In the 1930s, before the links between smoking and disease were established, the tobacco industry in Australia was actually promoted and protected. Federal law in that era required that 50 per cent of the tobacco in cigarettes be Australian grown, which embedded a strong tobacco-growing industry in Queensland and Victoria. The proportion of local content was even boosted, to 57 per cent, as late as 1977.
But progressively, and certainly very strongly by the early 1990s, a range of factors came into play that led to a pretty sudden and absolute about-face. Freer trade, with significantly lower tariffs, meant that previous constraints on the importation of cheaper tobacco were reduced, which in turn crippled the relatively high-cost local industry. After a restructuring scheme, the industry shrank from about 600 growers in the 1970s to no growers by 2006. Almost simultaneously, there was a growing awareness of the appalling health and financial costs of smoking, which quickly gave rise to a highly effective legislative and regulatory campaign against tobacco use in this country. Advertising was banned in 1992, and since then, especially over the past decade, antitobacco, pro-taxpayer measures have proliferated. Excise was increased by 25 per cent in 2010. Plain packaging with graphic health warnings was instituted in 2011. In 2013, annual 12½ per cent increases in excise began, going through to 2017. In the 2016-17 budget, those increases were extended through to 2020 as part of a broader package of measures instituted by this government to increase the national effort against smoking, with this bill being part of that package. As a result, thousands of lives will be extended, and many billions of dollars will now be available for more productive work on behalf of Australian taxpayers.
But the success of this ongoing campaign to reduce the human cost and the dollar cost of tobacco consumption has created major challenges for law enforcement. As a direct result of having created the most expensive tobacco market in the world, we have made ourselves a big target for illegal products, especially from countries to our north, who have some of the lowest tobacco prices in the world. In China, for example, a pack of 20 cigarettes retails for about $3.40, compared with about $25 to $26 here. In South Korea, the price is about $3.60. In Indonesia, it's under $2 a pack. The temptation for criminals is obvious: produce or buy cheaply in any number of countries then smuggle the product into Australia, deliberately avoiding customs duties, and you'll make a lot of money. Today's illicit tobacco trade operates in much the same way cheap booze from Canada and the Caribbean flooded into the United States during the prohibition era—to enrich and empower vast criminal enterprises.
The ATO and the Department of Home Affairs estimate that almost $600 million in tobacco duty was forgone in the 2015-16 financial year due to Australia's illicit tobacco trade. Regular reports by KPMG that seek to quantify the scale of the illegal market suggest the cost of this illicit tobacco could be as high as $1½ billion in avoided duties, based on the estimate that about 14 per cent of tobacco sold in Australia is now illegal. If KPMG is right, one in seven cigarettes smoked in Australia avoid excise duty. The impact of that at a national level is twofold. One is revenue lost. Tobacco taxes currently contribute around $9 billion annually for taxpayers, with that number set to grow exponentially given the ongoing big increases in excise. By 2020, excise revenue will likely be around $13 billion. The second highly likely impact is a reduction in the rate at which people either quit or resist the smoking habit due to an increasingly ready access to cheap illicit tobacco products. Should this impact be felt, any resurgence of tobacco use will, as a consequence, have a discernible negative impact on national life expectancy and health costs.
But, in addition to the border national impacts of lower revenue and higher health costs, there are also some very important local impacts, including loss of income for many hardworking small businesses who are in fact selling the real deal, the real thing. While regularly doorknocking businesses across my electorate, it has become apparent to me how many small businesses are being hurt by this illicit trade. Many of these are convenience stores; they're tobacconists; they're newsagencies—businesses that already operate on very tight margins, and they rely on their local trade. These businesses already face the challenge of supplying a highly regulated product to an even smaller customer base—a customer base that has reduced significantly over the years, as we have already noted. However, while it has been government policy for many years to discourage tobacco use and offset the burgeoning public health cost, these retailers do remain law-abiding tax-paying businesses. These are Australian businesses, employing Australians. And while the ultimate public policy objective, through education, excise and regulation, remains consistent, this does not mean that small businesses should face the added burden of aggressive competition from a criminal black market in illicit tobacco. Clearly we need to increase our efforts to not just stall the growth of smuggled product but cut into it as deeply as possible with tougher laws and more rigorous controls at the border via new agencies, such as the Tobacco Strike Team recently established by Australian Border Force.
That's one task, but it's not the only one, because a second layer of activity in relation to excise avoidance is now also in play, with illegal onshore tobacco cultivation making something of a comeback. In March last year, a crop worth $11 million was discovered in New South Wales near Cooma. In March this year, 4.2 tonnes of tobacco leaf and 12 acres of crop were discovered near Ballarat in Victoria. In April, in the largest cross-agency investigation that that Australian tax office has been involved in, a $60 million operation was discovered in the Bundaberg region in Queensland. There are many other examples, but that sample is indicative of the fact that the profit motive for criminals intent on avoiding their liability to pay excise duty has grown domestically as well as internationally, in lock step with the increase in tobacco price.
In a 2015 report, the Australian Crime Commission suggested that organised crime syndicates are deeply involved in this multibillion dollar racket because the rewards are great and, currently, the risks are slight. The very clear likelihood—the inevitability, you could say—is that this sort of activity is going to increase unless it is checked by tougher laws and more rigorous activity by our border and tax authorities.
This bill involves giving Australian Border Force personnel improved tools for dealing what has proved to be a significant problem in prosecuting smugglers at the border under the current form of the Customs Act. The act requires that, in order to lay the groundwork for a prosecution, knowledge or intent by principals to avoid excise-equivalent customs duty is required. Experience has established that proving such knowledge or intent to the level necessary for a successful prosecution is extremely difficult. Indeed, it is nigh on impossible in the face of people who are well-trained agents of, typically, highly organised crime syndicates, with a fine understanding of the fact that the Australian law requires extremely high levels of proof.
The bill therefore amends the Customs Act. The Customs Act will be changed to reduce the onus from knowledge or intent to avoid duties to one of recklessness, whereby perpetrators will be culpable for what is a lesser offence if it is established that their involvement with the importation of illicit product was undertaken with a reckless attitude towards whether duty was intended to be paid or not.
Other linked measures are contained in a separate bill, the Treasury Laws Amendment (Illicit Tobacco Offences) Bill, which was introduced into the parliament on 15 February. That bill eases one of the biggest problems that officers of the Australian Taxation Office have in prosecuting matters around illicit tobacco when it is discovered beyond the border. A current requirement of the law is that officers must be able to determine whether the product they are dealing with has been produced domestically or overseas to establish whether the issue is one of customs duty or excise evasion. That is a requirement that has also proved extremely difficult to establish. Attempts have been made to analyse samples to establish whether their origins are local or international to settle that question, but such is the nature of tobacco plants that that has proved impossible. Lack of cooperation from those being investigated, or their lack of knowledge, can stymie authorities on the spot. The Treasury bill therefore removes the need to establish origin. What will have to be established is a reasonable suspicion that either customs duty or excise duty has been avoided, whatever the actual source of the product.
This is an important battle and these are important bills in that context. At stake is an improvement in life expectancy for a significant number of Australians. At stake is the massive health bill that this significant number incur. Also at stake are billions of dollars in revenue that should accrue on behalf of taxpayers but is currently going to criminals and often to well-organised crime syndicates that channel their gains to help finance even further crime. Destroying this criminal enterprise completely may be beyond us. Nonetheless, doing all we can to minimise it remains our key responsibility, and it's for these reasons that I commend the bill to the House.
I would like to continue on from the contribution of the member for Fairfax, an excellent contribution no less, to this important discussion around the Customs Amendment (Illicit Tobacco Offences) Bill 2018. The basis of my short remarks is to support the bill and the spirit and the intent in which it seeks to achieve its outcome in the context of existing law, because I do have broader concerns about the operation of the regulatory framework and the way in which we engage with this product—tobacco—and the consequences it has in fuelling the illicit trade.
Illegal tobacco threatens the safety and health of our community and the viability of local business operators, and the measures in this bill will arm customs officers, Border Force agents, with the tools to fight organised crime and their illegal tobacco trade. I don't dispute its objectives, and they're very good ones, and that's the basis upon which I will be supporting this bill. But we also cannot forget part of the reason we are in this situation. It is because of the measures that we have taken to date and what they have done to fuel the illicit trade. I was not in this parliament at the time these matters were considered, but had I been I would have raised my deep reservation around, particularly, some of the ways that we sought to tackle the challenges around illicit tobacco, as well as the incapacity, or the inability, to address some issues that we confront today.
From 2013 to 2016, Australia's smoking rate fell by a dismal 0.6 per cent. This came off the back of a long period of reform to try and reduce the consumption of tobacco. In many cases, I support those measures. As somebody for whom tobacco contributed to the early death of three out of four grandparents, I believe strongly in tackling these issues. But we made a series of questionable judgements in the past. The first is the constant increase in tax rates and excise on tobacco. This makes it a more desirable product because the cost basis of production is becoming increasingly distant from the price of consumption. That gap, or the consumer surplus that grows with the increase in the tax rate, means that it becomes a more desirable product for organised crime, because the margins that can be secured from engaging in the trade are considerable. And that will not change. So long as we keep the excise at the rate that it is we will continue to encourage illegal gangs and those engaging in ill means to engage in the illicit tobacco trade. But we've doubled down on that by not just increasing the tax rate, increasing the consumer surplus and increasing the desirability and attractiveness of this trade by increasing the tax rate; we have also increased the desirability of this product by making it interchangeable.
A couple of parliaments ago this parliament introduced plain packaging legislation in the Commonwealth of Australia. And what was the consequence of plain packaging? It took a product that was already of high value and had a high consumer surplus and said, 'Now it is interchangeable, indistinguishable.' That's the whole point of plain packaging legislation—to take a product and remove its branding so consumers can see no difference, while at the same time increasing and ratcheting up the price. So, its desirability goes up, it's capacity to be engaged in counterfeiting and illicit production increases even more dramatically, as do the benefits of illicit trade. This is the fundamental problem with this approach to dealing with issues around tobacco regulation. You're actually fuelling, or at least increasing the risk of fuelling, the illicit trade, mostly to the benefit of criminal gangs. That's what comes out very clearly in different pieces of research and reports. We know that illicit consumption is up. We know the illicit trade is up. We know that the loss to government revenue continues to increase, year on year, and it's aided and abetted by the measures that have been consistently applied by previous parliaments.
The challenge for us, if we want to cut tobacco consumption—and I do—is to introduce measures that actually help cut consumption, reduce the desirability for criminal gangs to be involved in the trade and to take advantage of the consequences of our legislative arrangements, and look at measures that work. We actually did an entire inquiry, in the Standing Committee on Health, Aged Care and Sport, on the legal accessibility of e-cigarettes and vaporisers and the legalisation of vaping as an alternative to smoking. What the data showed from these reports, looking at international research and the experience of other countries—even when I was in Manchester only recently speaking to health officials—is a very clear and consistent message. People did not think that vaping was necessarily the best measure that they would like to see. They'd rather see people quit, as would I. If they don't quit, particularly those stubborn lifelong smokers, then in the absence of that finding a harm reduction alternative is incredibly important. Vaping fills that critical and important gap. That is so much so that, as I learned when I was in the UK recently and spoke to health officials in Manchester, they now actively promote it as a measure to help reduce people's consumption and behaviour in light of the circumstances. So we put that against the backdrop of what we've been doing in tobacco, which is making it more profitable and more substitutable for criminal gangs, but we haven't then gone on and said that we should support the measures that we need to make sure that we can actually cut smoking rates.
I have to say that I have real concerns about the framework of the approach that many people are taking in this policy space, because it's not actually cutting smoking rates. It is rewarding criminals. It's not helping the consumers. It's also not helping, of course, one of the critical bases on which we have been told we have to support various bits of legislation, which is to increase government revenue to offset the consequences of tobacco consumption. Sadly and tragically, this approach that we have taken, for which we have sometimes been extolled internationally for being a world leader, is being adopted everywhere else. That isn't to say that there isn't a role for tax as part of disincentivising people from consuming tobacco. That's true, and that is a critical part of what we need to do, because there are some people who do have an inelastic approach and do need that incentive. But it would be foolhardy to say that it has not gone to quite incredible extremes in recent years. As I said, when you overlay that with the issues around plain packaging, you see the same consequences. We know that other countries have followed suit and followed us. Despite extolling the virtues of the plans around these policies, the UK, Ireland, France and New Zealand have, frankly, had deeply questionable outcomes, as we have, in the efficacy of these policies.
Of course, when we talk about the efficacy of these policies, yes, we're talking about things like government revenue. That's an impact, but the real impact is on human lives. Sadly, there are too many health sociologists parading themselves as public health officials who would rather keep supporting bad ideas they've come up with and taken ownership of than do the right thing and change the laws to enable people to have a pathway to reduce their consumption and hopefully move towards cessation.
I would hope that this parliament takes note. I would hope that this parliament seeks to consider other alternatives to reduce tobacco consumption in Australia and to improve the livelihoods, the health and the wellbeing of Australians who are caught in the trap and curse of tobacco consumption and nicotine addiction. That is why I am a proud supporter of people being able to access vaporisers and vape legally, not just with vaporisers but also with the capsules. If you want to introduce a policy framework which actually cuts tobacco consumption, that is the pathway in which you do it, on top of constraining and suffocating the criminal gangs who engage in taking advantage of the consequences of the laws we now have on the book. The consequences of the laws are the increase in the price of a product, the increase in the consumer surplus and the increase in the gap between the production and the consumption and the price, which makes it a very profitable industry for those who want ill-gotten gains. The measures we have taken have also made it a substitutable product, which has only exacerbated the already existing problems of that regime.
That's why I support this bill, because ultimately it works to empower and enable those Customs officers to do what they need to do to suffocate that trade. But that trade can be supported in its suffocation by reducing demand from consumers, because people no longer see the advantage of engaging in tobacco consumption and see the advantage of alternatives as a pathway to at least harm minimisation and hopefully cessation. If we do that, we would have a healthier, happier, longer living nation of people, with reduced dependence on nicotine addiction.
I know I'm not alone in supporting this important issue in this parliament. I know a number of other members have spoken very directly about the importance of reducing tobacco consumption, some on the other side of this parliament and some on this side of the chamber as well. I know that there are other members who have been steadfast, dutiful and loyal to the pursuit of trying to reduce consumption, like the member for North Sydney and the member for Bowman, who support me on the quest to try to remove the barriers that stop people from getting off tobacco and onto alternatives, particularly vaporisers. I congratulate them for their efforts, their leadership and their courage in standing and doing the right thing. I wish I could see many more people stand up and follow their leadership on this important issue.
In the same way, I'd like to see an honest assessment of and honest reflection on the challenges we face in the tobacco consumption space and a proper consideration of the laws that are already on the books. I remember that back in the day when legislative arrangements around plain packaging were introduced, people said it was going to deliver all these wonderful things. But the truth is that consumption largely stagnated. It didn't actually have that effect, but we've gone on and extolled its virtues all around the world, mostly to fan the notoriety, professionalism and awards showered on the former health minister. But has it actually delivered the outcome? It's a classic problem that many people, including people like Milton Friedman used to argue, which is that you shouldn't judge a policy on its intent, but on its outcomes. When you judge a policy on its intent and not its outcomes, this is the situation you end up with—
This is the consequence when you judge a policy on its intent and not its outcomes: you have a ballooning illicit trade, which is to the benefit of those people who, let's face it, are the scum of the earth—organised gangs and those who seek to take advantage of the legislative arrangements and work the consequences of legislation and regulation to their own commercial benefit. I would have thought that people in this parliament would look at that situation and say, 'It is a travesty.' We have, of course, seen this before. If we go back to the prohibition movement in the United States in the 1920s, unsurprisingly, people produced products at a low price but were able to charge high prices because of their seemingly illicit and illegal nature. What occurred, of course, was that people found ways to profiteer and to make enormous benefits out of it for their own personal gain. And, frankly, they left a trail of human tragedy and misery behind them; but that did not concern them, hence I use the expression 'scum of the earth'.
That is the problem that we continue to face in this policy space. That's why we have to reflect very seriously on our policy objectives and what we're seeking to do in terms of achieving them and implementing them. We know that where there is a regulation that is unjust or has some sort of exceptional consequence, particularly for an interchangeable product, there is a way around it. There has been a long tradition of this. I used the example going back to the prohibition movement, where people found justifications to continue their consumption of alcohol. Some people used to shroud it in the environment of their faith and that they needed it as part of their access to faith. But, more critically, even people who were trying to do the right thing and comply with the law found ways around it—like people selling hops, barley and water and putting warning signs up: 'Warning, if you mix these ingredients then you will break the law and create beer.' That's how people got around it and took advantage of the legislative arrangements. Those are the sorts of lessons we should learn from and not repeat.
I'd like to thank all honourable members for their contributions to this debate on the Customs Amendment (Illicit Tobacco Offences) Bill 2018, including and particularly the contributions of the members for Fairfax and Goldstein and the other members who made their contributions. As those members well know—indeed, as some of them have raised it with me on prior occasions—criminals who profit from the trade in illicit tobacco undermine the government's strategies to promote good public health outcomes and they threaten the viability of law-abiding local business operators.
This bill enhances border and law enforcement agencies' ability to investigate and prosecute the illegal importation of tobacco and supports the new illicit tobacco offences contained in the related Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018. Together these two bills establish a comprehensive set of offences targeting the importation, possession, purchase, sale and production of illicit tobacco. The amendments will make it easier for the Australian Border Force and the Australian Taxation Office to investigate and prosecute criminals who are involved in the illicit tobacco trade, regardless of its origin, whether smuggled or grown domestically. New offences will allow enforcement officers to target a wider range of participants in the illicit tobacco trade and will enable our courts to impose severe fines and lengthy prison sentences on criminals who engage in deliberate and highly calculated defrauding of the Australian public.
The framework the government seeks to legislate is backed up by our commitment to over $70 million in funding to the ABF-led Illicit Tobacco Taskforce in the 2018-19 budget. Together with its predecessor, the Tobacco Strike Team, the Illicit Tobacco Taskforce has seen considerable operational success since its establishment, including as recently as last weekend. Last financial year the ABF detected more than 240 million cigarettes and 217 tonnes of tobacco at the border. Worth over $356 million, it evaded duty that would otherwise have belonged to the Australian taxpayers, the Australian public. While it has been illegal to grow tobacco in Australia for over a decade, since July 2016 the ATO has seized 231 tonnes of illicit tobacco, worth an estimated $194 million in forgone tobacco duty.
The Turnbull government is committed to stamping out the trade in illicit tobacco and disrupting the serious and organised criminal groups that profit from it. On that note, I commend the bill to the House.
I thank the minister. The original question was that this bill be now read a second time. To this the honourable member for Blair has moved an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.
The question now is that this bill be now read a second time.
Question agreed to.
Bill read a second time.