Taxing tobacco into illegality. How split responsibilities and high excise created Australia’s tobacco wars

By Sinclair Davidson

Australia’s tobacco control policy has reached a breaking point. For decades, bans on advertising and steady excise increases reduced the incidence of smoking and raised reliable revenue. Since 2019–20, however, revenue has persistently fallen short of Budget forecasts and a violent illicit market has expanded. This paper explains how split responsibilities and misaligned incentives have produced this outcome. The paper shows that excise has moved beyond the point where it is either efficient or corrective. It argues that the Commonwealth is rewarded for over-taxing while states and local communities bear the health, policing and insurance costs of the disorder that results. The paper concludes that Australia needs policy clarity and institutional reform. Tobacco control cannot be both a public health programme and a revenuemeasure. To stabilise the market, starve organised crime and bring control back to the legitimate sector, the paper calls for bold policy change.