Legislative Council: Wednesday, May 18, 2022



Tobacco and E-Cigarette Products (Importing and Packing of Tobacco Products) Amendment Bill

Introduction and First Reading

The Hon. C. BONAROS (16:05): Obtained leave and introduced a bill for an act to amend the Tobacco and E-Cigarette Products Act 1997. Read a first time.

Second Reading

The Hon. C. BONAROS (16:06): I move:

That this bill be now read a second time.

I am pleased, on behalf of SA-Best, to introduce the Tobacco and E-Cigarette Products (Importing and Packing of Tobaccos) Amendment Bill, a replica of the bill that was introduced last year to address the severely inadequate penalties for the importation and packing of tobacco products here in South Australia that are illegal.

As I noted previously in this place, while legal tobacco consumption in Australia is decreasing, illicit tobacco consumption is an absolute booming trade. In its 2019 report on illicit tobacco in Australia, KPMG reported a massive 47.6 per cent increase in illicit tobacco consumption from the previous year. It amounted to 20 per cent of the combined tobacco market. That is 3.1 million kilograms, representing $3.41 billion of missed federal excise duty.

It is not even the financial implications that should concern us. There are, of course, very serious unknown health ramifications of the consumption of unregulated products, which have, in many cases, likely been manufactured in standards that do not meet Australian standards, in overseas unregulated markets at very low cost and with little regulation, if any at all.

Just over half of the total illicit tobacco consumption in Australia in 2019 was contraband tobacco, legitimately manufactured by the owner of the trademark but smuggled into Australia to avoid excise duty. Almost 45 per cent was unbranded tobacco, often sold as finely cut loose-leaf tobacco, commonly known as chop-chop, and it is absolutely anyone's guess what the chemical make-up of these are.

The Australian tobacco market is one of the world's most regulated markets and for very good reason. There has been a huge campaign in Australia to decrease smoking rates, to warn the public of the health impacts of smoking, and it has been successful to a large degree. However, the lower penalties currently prescribed in the South Australian Tobacco and E-Cigarette Products Act 1997 and the high price of cigarettes makes it very appealing for those who have not been able to kick the habit, particularly when the cost of a packet of illicit cigarettes is around half of what a packet of cigarettes would otherwise cost you.

The penalties for the importing and packaging of illegal tobacco are absolutely laughable, completely inadequate and offer absolutely zero deterrence. There is an expiation fee of $500 and a maximum penalty of $10,000. This bill is proposing an expiation fee of $1,250 and a maximum of $50,000. That is a tenfold increase in terms of the penalty. Given the opportunity for substantial profits with very, very low risks, it is little wonder how freely available illicit tobacco is in South Australia and other Australian jurisdictions.

You only have to walk down a number of very well-known roads in Adelaide, walk into shops and supermarkets, ask for what is under the counter and you shall receive a packet of illegal cigarettes. Again, if you consider that a packet of legal cigarettes can cost you $50 these days, it is easy to see why the demand for these cheaper, inferior, unregulated products is high. It is a low risk for organised criminal activity. It is a booming trade in illegal activity.

It is $3.4 billion that we lose in excise. That money could be going towards health. It could be going towards myriads of issues, but it is money that we are effectively missing out on because those in the criminal activity world seem to be smarter than politicians in terms of how to make money. Given the very low penalties that apply, if I were one of these traders and I knew that I would cop a slap on the wrist, most likely an expiation fee of some $500 as opposed to even a criminal penalty, and I have a couple of hundred thousand dollars' worth of illegal cigarettes out the back, I know which I would take—if that were the kind of person I was.

Why face the lengthy prison term for pushing illegal drugs when you can also make big profits in the chop-chop trade? It is not just packets of cigarettes we are talking about. We are talking about loose-leaf tobacco sold as chop-chop, and that is rampant throughout South Australia. Raising the maximum penalty to $50,000, which prosecutors may elect to pursue, instead of simply issuing these expiation fees is at least a start, but clearly a lot more needs to be done. This work needs to be done at the federal level to figure out how we are going to stop losing $3.4 billion of excise every year to the illegal tobacco trade.

Smoking rates in Australia have been on a downward trajectory, particularly in the past 30 years, and they now sit at about 11 per cent, but those people who are still struggling are turning to these cigarettes because they are effectively affordable. What they do not know is what is in these cigarettes. What they do not know is the conditions under which they were made. They do not know the chemical compound that is in these cigarettes. They do not know if they were made in hygienic or unhygienic conditions. For these individuals who continue to smoke, it is an easy choice because this is an affordable product, but it does come with significant long-term risks.

I did not know how readily available these cigarettes are. I am about to admit to committing an offence in South Australia. I visited some of these shops and asked if they sold cigarettes. I thought it would be a difficult process. I visited two or three of them. I walked in and walked up to the counter. I said, 'Do you have cigarettes?' They said, 'Yes. What would you like?' I took a stab in the dark. I asked for a brand; they had that brand. I went to another shop; they did not have that brand. I asked for another brand. I walked away with about three or four packets from a couple of shops. Maybe it was just by chance that I managed to get them, so I sent a couple of other people in. I asked them to do exactly the same. They also walked out with a couple of packets each. Between us, on one visit I think we managed to get five or six packets of these cigarettes.

The Hon. I.K. Hunter: So you get other people to commit an offence as well.

The Hon. C. BONAROS: I did indeed, as part of my research. So it turns out that it is actually very easy. If you know where to go, it is not something that is hidden, aside from the fact that it is under the counter. They are not on display in the shop—that would be in breach of our laws that do not allow us to display cigarettes—but there is certainly a drawer that is opened. In the case of the shops that I frequented, a drawer was opened. I could see what cigarettes they had in there. I told them what I would like.

But here is the really interesting part, and I wish I could have brought one as a prop but we are not allowed to have props: you could be forgiven for thinking that they are legitimate cigarettes but in many instances, and you would have to test this with a smoker, you find that they are literally fakes. Just like a fake handbag or a fake pair of Gucci shoes or a fake Dior purse, these are not manufactured by the manufacturers themselves. They are manufactured by other companies and mimic the real cigarette. For instance, it might look like a packet of Marlboro cigarettes but it is not actually a packet of Marlboro cigarettes made by the producers of Marlboro. They are actually fake cigarettes in many instances.

As it turns out—and I saw this on one of the packets—there are telltale signs of when they are fake because sometimes they look like a packet of duty-free cigarettes. They do not have our labelling laws because they completely fail to meet our labelling laws, but if you were in an international duty-free store and you picked up a packet of cigarettes and it had the small label on it, it looks like that—and some of them are marked with 'duty-free cigarettes' on there—but when you take a closer look at the cigarette itself, sometimes the logo and the branding are a little bit off, just like a fake Gucci bag. Sometimes the spelling of Marlboro or Davidoff or Winfield is a little bit off because the spelling is not entirely right.

They are clearly not even real cigarettes made by the manufacturer and sold here illegally; they are actually rip-offs of real cigarettes that are being sold illegally. It is quite remarkable. There are any number of places where you can get them in South Australia. I know I am making light of this, but it is actually a really serious issue because what we do not know is what is going into these cigarettes.

It is one thing for us to be buying Marlboro cigarettes that are intended for the duty-free market and sold here without meeting the requirements of our labelling laws, but it is quite another to be buying a packet of cigarettes that mimics Marlboro but is in fact not Marlboro and we have no idea under what standards and practices, including hygiene standards, those cigarettes have actually been made. There is an entire report that has been dedicated to this issue. Clearly, this is an issue that we should all be concerned about. I do not know how $3.41 billion has not got the attention of anyone else in terms of lost federal excise duties, especially given that they are so readily identifiable.

I went to a function one evening—I am not going to say where I was—and there were a number of smokers at this function. At least eight out of 12 people there were smokers. I was in a country town which was even more remarkable because I was trying to figure out where the heck they got these from in a country town. There was not one legitimate packet of cigarettes on the table amongst those people. Every single person at that event had an illegal packet of cigarettes with them, which I found extraordinary. Now, it might be the company I keep or it might just be that these cigarettes are so readily available that it is that easy to get your hands on them. I am telling you it is that easily available because, as I said, I have done it, I have walked in, I have bought them.

I just want to make one final point and then I will leave this to the committee stage when I will give you some more entertaining facts and figures then. These are not precise figures but I think it is worth members noting that, if one of these shops is selling a packet of cigarettes for $20 to $25, then the advice that I have had is that that packet of cigarettes at its maximum has cost that person $10 or $15.

So they are buying the illegal cigarettes for $10 to $15 and they are selling the illegal cigarettes for $25—that is a $10 to $15 profit on each packet of cigarettes. When you go to a legitimate tobacco retailer, that packet of cigarettes might cost you $50. They are paying the $10 to $15 for the same packet of cigarettes and they are also paying another I think between $25 to $30 per packet in excise, so that is what it is costing them in excise. So if they are making $5 a packet on each of these regulated packets of cigarettes they are selling, then they are lucky.

There is not this huge profiteering in the selling of cigarettes, but it is certainly of concern and should be of concern to that market that they are paying, quite rightly, a huge amount of money in excise, which is going towards our health system, our roads, our education and whatever else, and the person down the road is buying them for $10 and selling them for $25 and making a clear $15 profit, and they are not meeting any legal obligations and they are presenting and posing a risk to the people ingesting those cigarettes.

I do not mean to make light of it, because it is not a laughing matter. From a health perspective it is actually quite serious. This issue has just, for the benefit of members, also come up in the Legislative Review Committee, which is due to report to this parliament on the issue of tobacco and cigarettes.

I raise it in the context of the laughable penalties that apply to this compared with the maximum penalties that would actually apply to somebody who tried to take a packet of legal cigarettes into a detention setting, because we have a maximum $10,000 fine here but if I were to go to Yatala and try to sneak in a packet of cigarettes to an inmate, I would face a maximum two or five years' jail—I cannot remember exactly (I will correct the record during the committee stage).

There is a significant maximum jail term that applies for trying to sneak contraband cigarettes into a jail, yet the illegal activity that is occurring right before all of our eyes on the streets of Adelaide is attracting an expiation fee of $500 and a maximum penalty of $10,000. I am urging members to consider this bill favourably. I will provide further details from the report when we get to the committee stage. With those words, I commend the bill to the chamber.

Debate adjourned on motion of Hon. I.K. Hunter.