Coalition plan to hit 'gangs where it hurts' would slash tobacco tax and legalise vapes

Tobacco tax would be cut by as much as 80 per cent under a new Coalition plan unveiled on Wednesday.

Opposition leader Angus Taylor has outlined his plan to reduce the tax paid on purchases of cigarettes and tobacco products in an effort to reduce the lucrative nature of the illicit market.

The plan would also legalise the sale of nicotine vaping devices and nicotine pouches, which are currently restricted.

Opposition treasury spokesperson Tim Wilson said the plan will increase federal revenue while reducing cash flow to organised crime.

"It'll increase government revenue by about $2 billion a year because it will stop people buying products from the black market and will lead to them buying it in the real market," Wilson told ABC Radio National.

He argued that Labor was too focused on law enforcement while One Nation — who announced their policy of a 75 per cent reduction in tobacco duty — was too focused on cutting tax alone.

"We actually get the outcome Australians want, which is to break illegal tobacco trade, stop fuelling the fire bombings of stores ... and make sure we raise revenue to deliver a better health outcome," he said.

The Coalition has said its 80 per cent reduction plan will be backed by a $200 million nationwide crackdown on the illegal tobacco trade, which it says earns criminal gangs between $4.1 billion and $6.9 billion in profit each year.

A $60 million, three-year "public awareness and education campaign" would also be conducted to warn Australians of the dangers of smoking.

Labor Assistant Treasurer Daniel Mulino has previously rejected such a plan, arguing there is no evidence to show cutting taxes would eliminate the illegal trade.

Declining smoking rates under question

Public health authorities have long advocated for raising tobacco duty in an effort to price consumers out of the market. They have consistently warned that cutting taxes will reverse decades of decline in national smoking rates.

Laura Hunter, CEO of the Australian Council on Smoking and Health, previously told SBS News making cigarettes cheaper would have "huge ramifications for the health of Australians".

"Australia now has the lowest smoking rates that we've ever recorded, and that's the result of decades of policies that are designed to make cigarettes less affordable, less available in the community, and less normalised," she said.

However, the Coalition points to Australian Bureau of Statistics figures that show tobacco consumption increased by roughly 30 per cent between 2022 and 2025.

While sales of illegal cigarettes and nicotine products have declined dramatically, wastewater analysis shows that overall nicotine consumption is surging.

One study published in the JAMA Network Open journal estimated that illicit tobacco use in Australia more than doubled between 2017 and 2023.

At the same time, the cost of legal tobacco products has nearly tripled since 2016. In 2026, a standard packet of cigarettes ranges from $40 to $70, while black market cigarettes have remained at a consistent $10 to $20.

"The current approach has also become a disaster for the budget," the Opposition wrote in its press statement.

Tobacco excise has historically been one of the highest revenue earners for the Australian government, earning $16.3 billion in 2019-2020.

That figure dropped to just $8 billion last financial year, and budget estimates expect it will drop to $4 billion by the end of the decade.

Tobacco gangs waging 'economic terrorism', Opposition leader says

Rising tobacco duty has been linked to increasing incidents of gang-related violence and attacks on corner stores, particularly in the Victorian capital.

Taylor has argued that organised crime is "waging a campaign of economic terrorism on Australians".

"Our strong plan will attack the gangs where it hurts by taking away their massive price advantage, taking away their customers, and taking away their profits," he said.

"You don’t bring organised crime to its knees by protecting its business model. You have to destroy the business model, and that’s what the Coalition's policy will do."

James Martin, associate professor in criminology at Deakin University, told SBS News that the growth of Australia's black market was primarily driven by tobacco excise increases.

He said organised crime groups had captured a growing share of the market by offering much cheaper products, while government efforts to tackle the trade through enforcement have yielded limited results.

"We've seen massive investment in law enforcement over the last few years, and it's been accompanied by record arrests, record seizures," he told SBS News.

"But the actual impacts on the market have been negligible."

Australia's Illicit Tobacco Commissioner Amber Shuhyta has warned previously that cutting tobacco excise could "pour more fuel on an already dangerous black market".

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