A failed war on fags

The Australian Bureau of Statistics (ABS) published an extraordinary figure this week. According to its estimate, 80 per cent of the cigarettes smoked in Australia last year were illicit. The legal market is on the verge of disappearing. Since the tobacco turf wars began in 2023, the black market has taken over. 

This is the first time the ABS has estimated the size of the black market in tobacco. The Illicit Tobacco and E-cigarette Commissioner previously estimated that illicit tobacco made up 50-60 per cent of the market in 2024/25. The ABS became interested after seeing “evidence from a range of sources [which] suggests that consumers are shifting away from legally purchased tobacco toward illicit sources, rather than smoking less overall”. No kidding. As regular readers know, Australia has become a basket-case in recent years thanks to having the highest cigarette taxes in the world and a ban on the sale of e-cigarettes. Firebombings have become common and gangland shootings are not unknown. The organised crime networks have recently branched out into alcohol.

The growth of the black market could have been prevented if the government had listened to economists, historians and criminologists. Instead, they fell under the spell of dogmatic fanatics masquerading as “public health” experts. As predictable as this fiasco was, the statistics in the ABS report are still breathtaking. The black market share of the tobacco trade went from 12 per cent in 2017 to 26 per cent in 2020 and then exploded after the pandemic from 40 per cent in 2022 to 80.6 per cent in 2025. In the same period, the quantity of nicotine consumed in the country rose by almost 40 per cent. The price of legal cigarettes nearly tripled between 2016 and 2025 while tobacco duty revenue more than halved.

It is a shame that the ABS waited for the problem to get out of control before it started measuring it, but our very own HMRC are making the same mistake. Despite legal tobacco sales halving in the UK since 2022, it maintains that “only” 13.8 per cent of the market was illicit in 2023/24. Recently published figures from KPMG based on the empty pack surveys tell a different story. In Europe, the countries with the highest cigarette taxes are in a similar position to Australia a few short years ago. In 2025, the share of the cigarette market that is “counterfeit or contraband” was 32.8 per cent in the UK, 35.2 per cent in Ireland and 41.4 per cent in France. The survey doesn’t include hand-rolling tobacco which even HMRC accepts is more likely to be sold illegally. 

There is no coming back from this for Australia. It is finished as a legal tobacco market. All it can be now is a cautionary tale for the rest of the world. The tipping point has come and gone. Smokers feel no obligation to pay taxes to a government that vilifies them, and vapers feel no compulsion to obey a law that undermines their health. At some point, the international tobacco companies will pull out of the country and anti-smoking campaigners can celebrate the ultimate Pyrrhic victory. As tobacco duty revenues fall to zero and the turf war escalates, they can pat themselves on the back and congratulate themselves on a job well done. They finally defeated “Big Tobacco”.