Michael Keenan (Stirling, Liberal Party, Shadow Minister for Justice, Customs and Border Protection) Share this | Hansard source

The coalition welcome the opportunity to support the Customs Amendment (Smuggled Tobacco) Bill 2012 but it is important to note that the bill has been debated in the wake of the Labor government's inconsistent and incompetent handling of this issue. While the Attorney-General is on a tobacco plain-packaging crusade and while her government introduced a rushed budget measure to ban duty-free tobacco, the Attorney is not willing to admit that tobacco smuggling is a problem in Australia, despite introducing a bill to that effect.

In the Attorney's second reading speech, she said that to date tobacco smuggling had not represented a major threat in Australia. It would seem contradictory to the opposition that we are debating this bill today if, according to the government, there is no particular threat posed by tobacco smuggling. This is clearly an issue the government is in denial on and it is refusing to address with any real conviction or action.

In the 2009-10 budget Labor cut funding for the Customs cargo screening program by $58.1 million. That is an enormous cut and the result is that the number of sea cargo inspections has been cut by 25 per cent and air cargo inspections reduced by a staggering 75 per cent. With less cargo being screened, there is a greater opportunity for illicit tobacco to be smuggled through our borders and indeed a greater opportunity for a lot of illicit materials, such as illicit guns, drugs and the precursors to drugs. The problem with these cuts is that they give criminals much better odds of being able to bring contraband into Australia. That should be condemned by everybody in this parliament. I note very strongly that the coalition will reverse this cut and make sure that Customs can screen cargo when it crosses our borders in a way that we would expect them to do to protect Australia from what might come over our borders.

The industry commissioned a report by Deloitte on the illicit trade of tobacco in Australia and it confirmed that illegal tobacco was a significant problem. The report found that the illicit market in Australia in 2011 was estimated to be a total of 2.26 million kilograms of tobacco, which is equivalent to 13.4 per cent of the estimated legal tobacco market. It is estimated that this represents forgone tobacco excise revenue of approximately $1 billion based on current excise rates.

While figures on the illegal tobacco market will vary and, clearly, it is difficult to find the appropriate methodology to assess how large this market is, we do have very strong indications that this is a problem and that illegal tobacco is smuggled through our borders. It is fair to say, as opposed to what the government is saying, that there is plenty of evidence to suggest that this is a significant problem, regardless of whether or not you accept the industry's findings holus bolus—and Deloitte is a respected firm. You can quibble about methodologies and the figures—it is nonsensical to say this is not an issue in Australia—but anyone who has been through a Customs warehouse will attest to the fact that they all smell of tobacco. Customs does intercept some illegal tobacco but, sadly, with the resourcing cuts that it has been subjected to, probably not enough.

The coalition supports measures that help reduce instances of smoking in Australia. But the government's duty-free tobacco ban, which is another one of those measures that is a good idea to the Labor Party but is completely bungled in its execution, has been handled in the Labor Party's typical bungled way. Sadly, this incompetence is characteristic of this government. Like most of the Labor Party's policies, the duty-free tobacco ban has been rushed and poorly planned. For example, the industry estimates the cost of emergency reprinting of landing cards will be $10 million. This has not been budgeted for and it is just a small example of the chaos that will ensue on 1 September when this ill-thought-out measure comes in.

The coalition is committed to preventative health measures; however, the Labor government needs to be committed to well-researched, targeted and planned measures.

Labor did not consult with the industry prior to announcing this budget measure and, despite promising that they would consult with industry on any substantive changes, the ban is due to come into effect on 1 September—that is, just over a week away. Yet if you talk to airports they have no idea how this is going to be implemented. This will be just another Labor bungle. Sadly, it is a great example of where this government can take a good idea, which is to try and take preventative health measures to reduce smoking, and completely bungle it in the execution to the point where it costs people money and is confounding for stakeholders who do not know what the government are doing. Clearly what happened is that when the government needed some revenue in framing the final parts of the budget in May this year, they came up with these sorts of measures. They did not have time to consult with industry and just implemented them without really understanding the consequences of what they were doing. Sadly, this is a hallmark of this incompetent government.

One of the reasons why the duty-free tobacco ban is going to be difficult is that the infrastructure in place at airports means that even things like storage and transportation of seized tobacco are not assured. Customs officers will be faced with angry passengers forced to dispose of their excess tobacco when they have not been warned of this change prior to coming to Australia. Notably the Australian Duty Free Association wrote to the Minister for Health and Ageing on 9 March 2012 asking if the rumours they had heard through the media were true and the government were planning to introduce the duty-free tobacco ban. The minister did not wish to engage with the association and has revealed that a handwritten note on the correspondence described the association as 'a minor organisation'. In her response, the minister referred the correspondence to the Treasurer, despite the measure being touted as health policy.

This is the peak body for the duty-free stores throughout Australia, not some minor organisation that should be treated with such contempt by this government. The Australian Duty Free Association wrote a letter to the Minister for Home Affairs on 30 March 2012 and noted:

We would like to make you aware of all the ramifications arising from this proposed ban, including the severe impact it would place on Customs. These include: (1) increased compliance costs for Customs associated with searching travellers with illegal cigarettes entering Australia at all airports; (2) Treasury assumes a revenue gain of $200 million versus Deloitte Access Economics's conclusion of a maximum of $42.1 million revenue gain; (3) a reduction in tax revenue from duty-free operators, suppliers and airports as a result of reduced profits and reduced income tax paid by employees as a result of job losses which will inevitably occur; (4) major inconvenience to tourists due to longer queues in busy airports and greater congestion due to additional Customs searches for cigarettes which will need to be declared; and (5) the potential for increased black market activities.'

This is a letter from the Australian Duty Free Association, clearly people with expertise in this area, and yet none of these issue seem to have been adequately addressed by the government. We already have queues that are too long at our airports. These queues are too long because the Labor Party, again with an incredibly short-sighted measure, ripped money out of the budget for passenger facilitation for incoming and outgoing passengers in Australia. We already have big queues at our airports and we are now going to have bigger queues because of these new measures. Of course, there is no corresponding increase in funding or resources for Customs. Sadly, as I said, this bungled approach is a hallmark of this Labor government.

As the association noted, duty-free tobacco will have very real consequences for the Customs primary processing line for incoming passengers and on the illicit tobacco trade. The cut that I mentioned was $34 million to the passenger facilitation program, and Labor axed a further $10.4 million from this program. This is all happening at a time when passenger numbers to Australia are increasing. They are expected to increase from approximately 32 million to 38 million in just four years. The $34 million hit Customs took has already had the effect of a reduction of 70 staff across primary Customs lines at Australia's eight international airports in the past financial year. This further funding cut will only serve to make waiting times worse. Airports are already short staffed and need more Customs officers, not fewer. Estimates by Customs show that international visitors to Australia will increase by more than 150 per cent and international departures will increase by more than 500 per cent over the next two decades.

Customs staff numbers and resources have not increased in line with passenger numbers. The ever-growing lines will only worsen with this duty-free tobacco ban, as many who would normally linger in duty-free stores will go straight to the Customs processing line. At some airports, such as Melbourne Airport, the lines have grown so bad due to Customs staffing cuts that they sometimes have to keep passengers on the planes, sitting on the tarmac, longer than they ordinarily would so that the Customs primary line is not completely inundated with the ordinary flow of passengers. This is, quite frankly, unacceptable, and it should hardly be considered best practice when you consider how fast some of our regional competitors are able to process passengers through airports such as Hong Kong and Singapore.

I just want to labour that point a little more. You have a situation at one of our major gateways, Melbourne Airport, where passengers who fly in are forced to wait on the tarmac because Customs cannot process people. That means that the Customs hall is so full that they cannot put any more people into it, so they need to keep people on planes, waiting on the tarmac. When you have come on a trans-Pacific flight, you have perhaps already flown for 15 hours. You arrive in Melbourne and have to wait on the tarmac because of the incompetence of the Labor Party in slashing resources to Customs, who can no longer do their job properly because they just do not have the personnel available to do that.

I think that is disgraceful. It is not the sort of impression that we want to make when people arrive in Australia. The government are making these cuts at a time—and I think this is the most egregious part of it—when there is no shortage of money; it is just that they have wasted money in such an egregious way that they have needed to come back and make these cuts to agencies that are dealing with front-line services. We deeply oppose that and we will prioritise front-line services if we get a chance to govern in the future.

I will briefly outline the purposes of the bill, as outlined in the bill's explanatory memorandum.

A division having been called in the House of Representatives—

Sitting suspended from 10:12 to 10:26

I was just outlining to the House some of my concerns about the implementation of this measure, and I now move on to the purposes of this bill as outlined in the bill's EM. The explanatory memorandum reads:

1. The purpose of this Bill is to amend the Customs Act 1901 (the Act) to create criminal offences for the smuggling of tobacco products and for the conveyance or possession of smuggled tobacco products where the person conveying or possessing the goods knows they were smuggled.

2. A smuggling offence currently exists in section 233 of the Act and is punishable by a pecuniary penalty of up to five times the duty evaded; however this offence is no longer considered an effective deterrent as many penalties currently imposed for tobacco smuggling are not paid.

I understand that this is because it is often the case that a company is involved, and it has proved to be difficult to pursue the people behind that company. Clearly, it makes sense to avoid that continuing. The EM continues:

3. On some occasions the investigation of the smuggling offence results in the identification of sufficient evidence to warrant the pursuit of fraud offences under the Criminal Code Act 1995 (Cth). In these cases offences carry penalties of up to 10 years imprisonment.

4. These new offences combine the penalties of the existing smuggling and fraud offences by providing a pecuniary penalty of up to five times the duty evaded in addition to up to 10 years imprisonment. The inclusion of the imprisonment penalty will provide a strong deterrent to criminals and will demonstrate the seriousness of smuggling acts.

The government has touted this bill as introducing new measures, but the maximum term of 10 years imprisonment and penalty units already exist under general smuggling and fraud provisions within the Criminal Code. However, it is understood that they are difficult for Customs officers to use for prosecution. The new offences under the Customs Act make it easier for Customs officers to use and require less onerous proof of evidence for prosecution, which the coalition supports.

However, the government needs to answer why this measure has been introduced without any increases in resources for Customs to screen and inspect incoming cargo to stop the illegal tobacco from coming through our borders in the first place. The Labor government seems intent on making it harder for Customs officers to ensure the risk of detection is high and to enforce these penalties. Despite the Attorney-General refusing to acknowledge illicit tobacco smuggling as a problem, the statistics speak for themselves. During 2010-11 Customs made 55 detections in sea cargo arriving in Australia. This equalled 258 tonnes of tobacco and 82 million cigarettes, with a net worth of approximately $135 million. This is just a small indication of the problem considering many more cargo consignments would go unchecked. The potential is that there is a much larger amount of smuggled tobacco coming through our borders thanks to Labor's cuts to cargo inspection.

This bill was referred to the Senate Legal and Constitutional Affairs Committee, which held an inquiry into the bill and recommended that the bill be passed. The coalition takes the recommendations of parliamentary committees seriously and is very happy to accept the determination of this committee.

It is interesting to note the submission made by the Australian National Preventive Health Agency to the inquiry, where they stated:

Smuggling and illicit trade of tobacco undermines the effectiveness of these tax increases and price policies: resulting in cheaper prices and potential increases in tobacco use. This in turn has the potential to contribute to higher incidence of smoking related morbidity and mortality.

According to the agency:

… the use of loose tobacco … has been associated with illness over and above that caused by commercially produced cigarettes due to bulking agents used such as twigs, raw cotton and grass clippings.

They also state that mould, mycotoxins and bacteria have been detected in illicit loose tobacco. Given the Attorney-General's crusade against smoking, why hasn't there been a big push to educate people about the dangers of illicit tobacco?

The Customs and Border Protection Service, in their submission, informed the committee that tobacco smuggling is identified as a key border risk. According to Customs, the smuggling of tobacco endangers the community and the environment. As they said:

Smuggled tobacco products commonly contain dangerous contaminants and much higher levels of carcinogens than legitimate products.

Furthermore, they pointed out:

Smuggled tobacco products also circumvent quarantine controls, thereby increasing the potential for exotic pests and diseases to be introduced.

In their submission, Customs also indicated:

Tobacco smuggling offences are often committed by organised criminal syndicates who view tobacco smuggling as a higher return and relatively low risk venture.

Of particular concern to the coalition is the following possibility noted by Customs:

The profits made by these syndicates can also potentially be used to fund other criminal activities.

The coalition agree with Customs that tobacco smuggling is a serious problem that only lines the pockets of organised crime. We believe it needs to be addressed, not ignored, as it has been for some time by this government.

The coalition also strongly believe that Customs should be appropriately resourced to do their job, which is to protect Australia's borders from outside threats. I strongly urge the government to, at the very least, reinstate the funding they have cut from Customs cargo inspections so the legislative changes made in this bill will have a better chance of being enforced.

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