Budget bottom line goes up in smoke as black market reaps reward

A $25 billion hole has been blown in the federal budget since 2019 due to a collapse in tobacco excise, prompting calls for the federal government to reverse years of ever-increasing taxes on cigarettes or risk driving more people into buying from the black market.When the first forecasts for tobacco excise in the 2023-24 financial year were released, by then-treasurer Josh Frydenberg in 2020-21, the government expected to raise $15.3 billion in revenue.

The $5.6 billion difference between the original excise forecast and what finally filled Canberra’s coffers was the sixth consecutive annual shortfall since the Morrison government revealed major changes to tobacco taxing arrangements, which promised to deliver an ongoing budget windfall. With cigarettes now costing at least $50 a pack, a heavy smoker faces an annual tobacco bill of $18,000 to maintain their habit. But with the black market offering cigarettes at just a fraction of the cost, many Australians are simply seeking out retailers willing to offer illicit goods.

“I think what they need to do is cut taxes on cigarettes, bring vapes into the legal market and go with significant law enforcement,” he said.

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Budget bottom line goes up in smoke as black market reaps rewardDespite ever-increasing excise, tobacco taxes are falling short of forecasts and leaving a hole in the budget. Experts say a cut in tobacco tax may be needed.
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