Independent research from KPMG LLP in the UK has found the black market’s share of smoked tobacco in New Zealand has increased to 12.1% of all tobacco smoked. This is an increase from 11.5% in 2019.

The growth in share of illicit tobacco comes despite total consumption of smoked tobacco declining 31% over the same period. Total consumption of illicit tobacco declined slightly less at 27.3%.

If traded legally, the Government would have received approximately $247.8 million in excise tax.

Imperial Brands Market Manager New Zealand and Pacific Islands, Brad Topp, said the illicit tobacco market was a problem that could not be simply wished away.

“There is money to be made from illegal tobacco. The cost of cigarettes in New Zealand can be up to 8 times higher than that of China or Korea, so importers have seen big margins while undercutting the prices at the counter.

“This should be of grave concern to government, public health and enforcement officials. There are 167 tonnes of tobacco being smoked that is untaxed and outside the regulatory and public health systems.

“The tobacco black market is a very large trade, pretending it doesn’t exist is not sound, evidence-based policy.”

Mr Topp said Customs New Zealand had made a number of significant seizures in recent years, but it was not sufficiently supported with resourcing and policy commitment.

“Customs do an excellent job with what little help they have. We work with them closely, including sharing these reports, to assist with their surveillance of the illicit tobacco trade.

“However, our view is that New Zealand will never get on top of the black market problem unless it commits resources into both the demand and enforcement sides.

“For example, the penalties and sentencing regime for trade in illicit tobacco are not a sufficient deterrent for criminal networks. Supply of Class A drugs is punishable by a maximum life sentence while the importation of illicit tobacco, which can be far more lucrative, is limited to a five-year sentence.

“A national illicit tobacco policy would recognise that illicit tobacco is a crime issue and give law enforcement agencies adequate powers to deal with the type of criminals who control the industry.

“These laws should be enforced by a multi-agency taskforce to successfully track, intercept, and prosecute participants in the illicit tobacco supply chain.”

Mr Topp said Australia implemented a number of worthwhile initiatives in recent years but the slowness to act has failed to stem the growth and sophistication of the trade.

In 2018, a multi-agency Illicit Tobacco Taskforce (ITTF) was launched in Australia to target and dismantle organised crime syndicates operating in the illicit tobacco trade. The ITTF combines the powers and expertise of the Australian Border Force and Department of Home Affairs with the Australian Criminal Intelligence Commission (ACIC) and other government organisations.

The Australian Government also increased criminal penalties to establish a stronger deterrence to illicit trade activity. Custodial sentences were raised to up to 10 years and fines were raised to up to five times the evaded excise value.

“New Zealand can still avoid the Australian experience if it acts decisively.

“It is in New Zealand’s interest to avoid the problems a black market brings and keep New Zealand smokers operating inside a legal, regulated system for tobacco control.”

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