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Homegrown And Imported ‘roll Your Owns’ Now Part Of NZ’s Growing Tobacco Black Market

An independent report from KPMG in the United Kingdom has found New Zealand’s illicit loose leaf tobacco market grew to more than 185,800kg in 2021, of which 13,500kg was grown illegally on New Zealand soil. 9.6% of smokers reported purchasing illicit tobacco in the last 12 months.

An earlier report from KMPG in 2019 estimated the total size of New Zealand’s illicit tobacco market, including imported cigarettes, stood at 230 tonnes. If traded legally, the Government would have received over a quarter of a billion dollars in excise tax.

Imperial Brands Market Manager New Zealand and Pacific Islands, Brad Topp, said the increase of locally grown tobacco shows the illicit tobacco market is a problem that can’t be wished away.

“The patterns show consumers are willingly turning to the black market and without prevention or enforcement, the entrepreneurial interests of those supplying illicit tobacco are expanding. Customs confiscated over 800,000 cigarettes in the first quarter of this year alone, a 60% increase on the same time last year.[1]

“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 is the first time we’ve found homegrown illicit tobacco being sold in New Zealand. It shows that this is no longer just an issue to police at the border.

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“Groups dealing in illicit tobacco have established sophisticated means of sale and distribution. The fact that more than 13 tonnes was grown illegally in New Zealand shows those growing it believe the risk in breaking the law is worthwhile.”

However, efforts to control illicit tobacco in New Zealand remain piecemeal and don’t dissuade underground networks from profiting in 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. Since establishing the ITTF, annual tobacco seizures have more than doubled in Australia, totaling 1.3m kg in the 2020-21 financial year and proving the effectiveness of targeted resource.

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.

Mr Topp said the illicit tobacco market in New Zealand could follow growth in Australia which has far greater levels of trade in illicit tobacco sustained by a highly sophisticated network of organised crime groups.

“Australia took a number of very worthwhile actions. However, they came too late and many officials there would now say trade in illicit tobacco is close to uncontrollable.

“New Zealand can still avoid the Australian experience by acting decisively.

“The $10m announced in Budget 2022/23 for additional Customs resourcing is a much-needed boost. A national illicit tobacco policy would go further to 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. We hope that new funding will also support retail enforcement, a crucial control measure which has been missing from New Zealand’s illicit tobacco response for far too long.”

Mr Topp also said New Zealand’s penalties and sentencing regime for trade in illicit tobacco did not act as a deterrent for criminal networks.

“If you contrast the penalties for illicit tobacco to those for illicit drugs it is simple to understand the attraction. 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.

“It would be a mistake to assume that New Zealand won’t reach Australian levels of criminal activity unless immediate action is taken by the Government to correct the current policy, sentencing and enforcement.

“New Zealand can only avoid the problems in Australia if it commits the resources to combatting the problem now.”

The 2021 and 2019 KPMG UK reports were commissioned by Imperial Tobacco.

By the numbers – New Zealand’s illicit tobacco trade

  • Annual consumption of illicit looseleaf tobacco in 2021 totalled 185,800kg.
  • 5.6% of smokers reported purchasing illicit looseleaf tobacco in the last 12 months, a 2.5 percentage point increase from 2019 (there was no survey in 2020).
  • 9.6% of smokers reported purchasing any form of illicit tobacco in the last 12 months.
  • 2021 was the first time that the average amount of tobacco grown per year by home growers was greater than the legal limit (5kg). The number of people growing increased by 0.4 percentage points.
  • If all illicit tobacco had been consumed legally in 2019, it would have represented an estimated excise value of $287.4 million.
  • The maximum homegrown allowance for tobacco reduced from 15kg to 5kg per year in 2019 per the Customs and Excise Act.

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