Tobacco and E-Cigarette Products (Tobacco Product Prohibitions) Amendment Bill

Introduction and First Reading

The Hon. C. BONAROS (16:44): 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 (16:45): I move:

That this bill be now read a second time.

I am pleased to introduce yet another piece of tobacco legislation, this time the Tobacco and E-Cigarette Products (Tobacco Product Prohibitions) Amendment Bill 2022, and will explain the reasons for this bill shortly. Members may recall that I have previously introduced a bill into this place to address the severely inadequate penalties for the importing and packing of tobacco products in South Australia. That was introduced into parliament in May of this year.

Following its introduction, I undertook discussions with government and its agencies that were tasked with dealing with these issues, and was advised that the legislation that I was initially seeking to amend still exists on the statute books but is not actually used, it is not operational. As such, I received further advice about a different approach to tackle this issue in order to ensure again consistency with commonwealth laws, which we did previously, but importantly also to ensure the enforceability of penalties and a better approach to tackle this issue through provisions of the bill we are now dealing with, which focus on packaging and supply, as opposed to importing and packing.

The bill was motivated by the explosion of the illicit tobacco market here in South Australia, much like the previous bill. We have seen, since the introduction of the last bill, further evidence that the market continues to boom, with the early June release of the KPMG full-year report, entitled Illicit Tobacco in Australia. Australians consumed 2,242 tonnes of illicit tobacco in 2021, representing an estimated excise value of $3.4 billion not going into government coffers; 19.3 per cent of the total consumption of tobacco was illicit tobacco. Unbranded tobacco, as I have previously said, commonly referred to as chop-chop, made up 68.6 per cent of consumption.

Members should be well versed in the term 'chop-chop' by now, which is finely cut loose-leaf tobacco. So, 29 per cent was contraband legitimately manufactured by the owner of the trademark but smuggled into Australia to avoid excise duty; 2.5 per cent was counterfeit, that is, illegally manufactured cigarettes. The Advertiser recently reported on the exploding local market after obtaining footage of 14 stores across Adelaide caught in the act of selling illicit tobacco. Those stores were scattered across the city, from Blair Athol to Pennington, Ascot Park, Elizabeth South and Mile End. It is estimated that each of these stores is selling over $900,000 of chop-chop per year. This new bill is modelled on the health provisions contained in legislation that exists now in New South Wales and Western Australia, aimed at tackling this issue. It seeks to amend the Tobacco and E-Cigarette Products Act 1997 to restrict the packing, sale and supply of tobacco products that are not marked with labelling and health warning requirements, bearing in mind the need also for consistency with commonwealth laws.

An expiation fee of $1,250 and a maximum penalty of $50,000 would apply for the sale of tobacco products that do not comply with packing requirements under the commonwealth Tobacco Plain Packaging Act 2011. Those penalties would also apply to the packing and sale of tobacco without a compliant health warning. A maximum $50,000 penalty would apply to a person who sells or supplies tobacco products and knows, or ought reasonably to know, it is a prohibited good under the commonwealth Customs Act 1901 or an excisable good under the commonwealth Excise Act on which excise has not been paid.

I will make some comments in relation to some further tweaking of the bill which may occur as a result of discussions in recent days that I have had, again, with government agencies about some of the issues that have been encountered in terms of enforcement here in this state. I do anticipate that there may be further changes following further input from SAPOL in South Australia—if, of course, the government is inclined to support the bill in the lower house—in terms of ensuring that it covers all the issues that we expect it to cover, because at this stage it is intended to apply to possession by retailers, not just those who are caught red-handed in the act of selling.

I think that has been one of the stumbling blocks and the hurdles that we have faced to date. It is one thing to walk into a store and see somebody walking out of a store with a packet of these cigarettes and being able to establish a case that that person bought them from that store, but if you have not seen that transaction occur then it is very difficult for any authorised officer, or indeed police, to have grounds to go into that store on the basis that they reasonably suspect that they may have possession of these cigarettes for sale, or chop-chop. If police require further tools to capture that activity, that is something that we will certainly work towards in terms of enhancing and tweaking the bill further, and obviously that can be done via amendments.

While legal tobacco consumption in Australia is decreasing, illicit tobacco consumption is absolutely booming. I note also the fast increasing rate at which vaping tools are increasing in this jurisdiction, which our colleague the Hon. Sarah Game referred to in her second reading on a bill that was introduced earlier today. There is no question that this is an issue, and I agree wholeheartedly that this comes down to the cost of these products, but in this instance we are dealing with products the health ramifications of which are unknown, because a lot of these cigarettes are made in unhygienic settings.

They are not made by the actual manufacturers of the cigarettes; they are effectively copies. I think I have referred to this previously. You have your Chanel handbag and then you have your Chanel rip-off handbag. You have your Benson & Hedges cigarettes and then you have your rip-off Benson & Hedges cigarettes, or your Davidoffs or whatever they are. I am naming too many cigarettes, but these are rip-off cigarettes; they are not actually made by the manufacturers themselves.

I understand that China continues to be the most prevalent country of origin. I think I mentioned previously that I went about purchasing some of these products to see how easy it was to obtain them, and many of them are made also in Turkey; I know that that is one of the places that has been highlighted as of particular concern regarding the hygiene and standards around which these cigarettes are made. It is really anyone's guess what the chemical make-up of these products are.

There is also the issue of compliance with our laws when it comes to packaging itself. They may be legitimate cigarettes which would otherwise be available for sale in Australia if they complied with our packaging laws, but as those laws stand they are illegal because they do not meet those requirements.

The Australian tobacco market is one of the world's most regulated, I think for very good reason. It is also one of the most expensive; in fact, I think it is the most expensive in the Asia-Pacific region. If you consider that a packet of legal cigarettes can cost anything up to $50 or $60 these days, I think, it is easy to see why the demand for these cheaper, often inferior and illicit products is so high.

It is a lower risk option for organised criminal activity. Why face a lengthy prison term for pushing illegal drugs when you can make big profits—$900,000 a year is a significant profit for one store—by taking part in the chop-chop trade? There have been reports made on the criminal activity involved in this space. It is a huge money-maker: over $3 billion a year in lost excise. It is a no-brainer: low risk in terms of penalties, low risk in terms of being caught selling these products, but huge, huge profits to be made in the criminal activity or organised crime space.

Despite the downward trend in smoking rates in Australia, at the end of the day some people will choose to smoke, and what we know is that for those people a regulated product is the lesser of two evils. We all know the risks associated with smoking; we have gone to extraordinary lengths in this country to educate our communities about the risks of smoking. We can only imagine how much greater they are with these unregulated products, when you simply do not know what you are ingesting.

Law enforcement must be equipped with the most effective tools to stamp out that illicit tobacco trade and, as I mentioned, a lot of work has gone into this so far in terms of ensuring that we land on a bill that actually suits what our enforcement agencies and authorised officers say is needed for them to have some real teeth, some real bite, in terms of enforcing these sorts of penalties. Our intention is to strengthen their capacity to fight against the exploitation of existing regulatory gaps.

Of course, it should be noted that this is not just a South Australian problem: it is a national problem, and one that requires a national approach. The federal government also has a lot of skin in the game and has a significant role to play in enforcement due to its responsibility in terms of collecting revenue. However, once those illicit tobacco products slip through our borders, or are locally grown, states have to equally take up the fight. As I said, local police do require adequate powers to disrupt the growing retail environment here in South Australia.

For the record—and I think this is important in terms of appreciating why these laws are necessary—I refer to a report for the Department for Health which indicates that during the first five years of tobacco plain packaging, in all Australia there were no prosecutions or civil penalties for breaches of those charges. It is worth noting that the data collected does not take into account any of the complaints received from the public, because they do not automatically lead to any sort of investigation. According to health department records, since 2012 there has been one conviction in all of Australia:

in 2012-13, 59 investigations, eight warning letters, three infringement notices;

in 2013-14, 59 investigations, 19 warning letters;

in 2014-15, 226 investigations, no warning letters, no infringement notices, no convictions;

in 2015-16, 210 investigations, 60 warning letters, one infringement notice;

in 2016-17, 402 investigations, 101 warning letters, no infringement notices or convictions;

in 2017-18, 239 investigations, 86 warning letters, five infringement notices;

in 2018-19, 135 investigations, 63 warning letters issued, no infringement notices issued;

in 2019-20, 80 investigations, 16 warning letters, two infringement notices issued: and

in the final year that I refer to, 2020-21, there were 313 investigations, 53 warning letters issued and one conviction.

So that is all we have seen in all that time, and in the meantime we are losing $3.4 billion worth of excise which could be going towards our health system, our roads, our schools and all our public infrastructure. Of course, we are also increasing the risks associated with these products.

Illegal organised crime in this area is absolutely booming; it is a booming trade. If I were to choose between selling illicit drugs and illegal tobacco, I know which one I would choose because, based on what I have just identified and articulated to the chamber, the penalties are a pittance and enforcement just simply does not exist, so it is absolutely easy to get away with selling these products.

It is my sincere hope that members will consider this bill with an open mind, particularly when it comes to the issue of those products that do not actually meet Australian standards in terms of their chemical make-up. I understand that it is one thing to have a packet of cigarettes that does not meet our packaging laws but it is quite another to be ingesting a product, the chemical make-up of which we simply do not know because of the conditions in which it is made.

It baffles me that any government anywhere in Australia would not be keen to get their hands on $3.4 billion of money that could otherwise be going into their coffers and making their life a lot easier in terms of the services that they provide. With those words, I commend the bill to the chamber and look forward to its progression. For the benefit of members, I flag that, following those discussions specifically with SAPOL, there may be some further tweaking to the bill to ensure that we do capture the issue of possession, for the reasons I have already outlined, and ensure that our law enforcers are able to do their job appropriately.

Debate adjourned on motion of Hon. L.A. Curran.