Michael Keenan (Stirling, Liberal Party, Shadow Minister for Justice, Customs and Border Protection) Share this | Link to 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.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the Customs Amendment (Smuggled Tobacco) Bill 2012. The bill creates new offences for smuggling tobacco products and for conveying or possessing smuggled tobacco products. I was very pleased that the Attorney-General announced this on World No Tobacco Day, 31 May, this year. It is a very special day for me because eight years ago I gave up smoking on World No Tobacco Day. I try to get the message out as much as possible to friends, workmates and family that smoking actually kills. Every cigarette you have brings you closer to cancer and many other illnesses. The more we can get that message out, the better for all of us. I also note at the outset that this Labor government has done everything it possibly can to get that message out, putting in a 100 per cent effort to curb the uptake of smoking tobacco.

We know that young people are the only market left in Australia for the tobacco companies. If you look at people over the age of 50, you see there are not many who smoke. There are two reasons for that: either they have given up or they are dead. That is why you rarely see people over 50 smoking. Therefore, the tobacco companies have only one market left in Australia in which to continue to grow and sell their product—that is, young people who for whatever reason are attracted to smoking.

As I said, this government deserves praise for its efforts to curb the uptake of smoking tobacco products, especially by young Australians, and all those efforts have been challenged by the big tobacco companies, sometimes right up to the High Court. Just recently, the High Court made a determination in the government's favour.

I have spoken on many occasions in this place about tobacco and how damaging smoking is to our health, and how we should all be doing all we can to encourage Australians to quit. Better still, they should never start. It is very important to get the message out to young people that they should never start, because quitting is a battle that will stay with them forever. Even although I quit eight years ago, I still consider myself to be addicted to tobacco. Every day the thought of having a cigarette passes through your mind. That is how addictive this product is. You are better off not having that addiction at all than having to battle it continuously.

Hence this government's well-founded but world-first plain-packaging legislation which diminishes the messaging of cigarette packets. As I have said, that is the only bastion of marketing to young people left—the marketing on the packet. I am very pleased that that will soon go, and so the reason to carry, show or 'sport' any cigarette packet and smoke its contents will be diminished.

We have heard from big tobacco representatives that plain packaging would be a bad thing because it would be easier for unscrupulous profiteers to take advantage of poor unsuspecting people with a propensity to form an addiction. This is what big tobacco say they fear. Their fear, of course, is that someone else will sell product instead of themselves; that their revenue will decrease. They know that plain packaging will reduce their revenue. They have said they fear an increase of counterfeit tobacco products smuggled into this country and sold to an unsuspecting population on the cheap, cutting their sales.

I would hope that most of us here would be more concerned with the number of Australians who put their lives in peril every day by smoking. I understand that around three million Australians continue to smoke around 22 billion cigarettes each year, and over 15,000 Australians are killed by smoking-related diseases, costing us all some $30 billion per year. So we have 15,000 dead and $30 billion up in smoke each and every year.

Dealing in tobacco products, in others' potential pain, misery and death, is utterly contemptible. Doing so shows utter contempt for the state. When you peddle that product, leading to misery for people because they get addicted, it costs the taxpayer billions of dollars when the state then has to pick up through the health system the pieces of shattered lives. I am speaking here of those who run illegal tobacco products.

There has long existed a difference between tax avoidance and tax evasion. Most of us are familiar with the basic distinction. All of us who submit a tax return each year know about using the rules to reduce tax by legal means such as negative gearing. We also know that misinformation, lying on your tax return, is something quite different. Tax evasion is theft from the Commonwealth, and that means theft from each and every one of us—our neighbours, our community, our workmates and the population of Australia as a whole. In a democracy where we are all notionally equal under the law, theft from the state, theft from every one of our fellow citizens, is, in my opinion, a very serious offence. This is what these illegal profiteers of tobacco are doing. Not only are they killing people; they are also committing a serious offence against the state by avoiding taxes.

Many would reason that, while theft from each other is wrong, theft by someone overseas or by a foreign company here in Australia may be even worse as no Australian benefits. This is what we are looking at in this bill today—theft on a grand scale, deliberate and highly calculated, by smugglers of overseas product which is doing damage to each and every one of us, especially to young people, through evasion of the taxes which must be paid by Australian companies who play by the rules.

This bill targets those who would seek to defraud the Australian public to the tune of over a hundred million dollars per year. In fact, in each of the last two years the amount stolen from the Australian public by people who smuggle tobacco into Australia has been as much as $135 million. This activity is illegal and punishable by a penalty equal to two to five times the amount stolen through tax evasion. I think we should throw the book at people or companies who know full well that they are breaking the law for substantial private gain. I do not think anyone would dispute that. I believe the financial penalty should be such that anyone would consider it madness to attempt to break laws through tax evasion and smuggling into Australia an addictive product which makes people ill and kills them.

I acknowledge that it can be difficult to extract these penalties from some criminals. In some cases, a guilty party may ensure he or she appears to have nothing to their name with which to pay the penalty. For this reason, this bill is very important. I support the added disincentive of a prison sentence of up to 10 years, which is applicable to this bill's new offence of smuggling tobacco products and applicable to any person who conveys or possesses tobacco products which the person knows were imported with the intent to defraud the Commonwealth of revenue. Jail time is not currently available as a deterrent for smuggling offences under the Customs Act. I think it is entirely appropriate that this bill carries that jail term.

During 2010-11, the Australian Customs and Border Protection Service made 55 seizures of smuggled tobacco products in sea cargo alone. That consisted of 258 tonnes of tobacco, which is 82 million cigarettes, representing $135 million, plus GST. The reasons I support this bill are twofold—that smuggling defrauds the Commonwealth and that tobacco products will continue to kill people who are addicted to them. I commend the bill to the House.

Geoff Lyons (Bass, Australian Labor Party) Share this | Link to this | Hansard source

I call the member for Aston.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

No; I am the member for Wannon, Mr Deputy Speaker. I am sure the member for Aston is busy somewhere working on behalf of his constituents—he being a very dedicated, hardworking local member.

Natasha Griggs (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

He is, just like the member for Wannon.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

It is very kind of my dear friend the member for Solomon to say that I am a dedicated hardworking member. Thank you. Later in life I might be delighted to use that as a reference, because the member for Solomon does a fantastic job on behalf of her constituents. I do not think there has been a harder working local member for the Northern Territory in all the time of the federal parliament.

Geoff Lyons (Bass, Australian Labor Party) Share this | Link to this | Hansard source

The member for Wannon might choose to address himself to the bill before the House.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

The member for Solomon is doing a great job. So it is fantastic to get that endorsement from her. I rise today to speak on the Customs Amendment (Smuggled Tobacco) Bill 2012, which, as stated by the shadow minister, the coalition supports.

The process of the bill getting to this place sums up the Gillard government. There is a proper way to do things, there is a proper way to implement, there is a proper way to create laws; and then there is the Gillard government way. It is almost like a Marx brothers approach, like some bizarre sitcom where we are just going to create a story, create a mess, create a muddle and then we will come in and try to half fix it. This bill sums that up.

In 2009-10, because of Labor's wasteful spending, they had to cut the budget for the Customs cargo screening program by $58.1 million. We also saw their incompetence in pink batts and the BER. They would say that they had a budgetary issue, they had wasted the taxpayers' money and they had wasted the surplus presented to them when the budget was in the black, and all of a sudden they say that they are in the red—they have some issues and they are going to have to cut the Customs screening program by $58.1 million.

As a result there is less screening, and the smugglers think to themselves that there is an opportunity so they start bringing things through the borders, including tobacco. All of a sudden we have an issue with tobacco smuggling. It is quite an impact. Various surveys and reports have been done; one of which showed that in 2011 an estimated total of 2.26 million kilograms of tobacco might have been smuggled through our borders into the Australian market. That potentially was a forgone tobacco excise revenue of approximately $1 billion. So they say they will cut Customs screening to save $58 million, but the end result is that that has cost us revenue of $1 billion. Only the Gillard government could dream up such a scheme and implement it.

Natasha Griggs (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

The Midas touch in reverse.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

It is the Midas touch in reverse, as the member for Solomon says. It is quite remarkable. Then they think that they have to do something about this so they had better toughen up on the offences in this area, and they decide they had better implement some changes. So what do they do in implementing the changes? They decide that they will also broaden some of the issues that they are going to address in this bill and look at some modifications to how duty-free provisions for tobacco are handled. The main industry representative body for duty-free issues is the Australian Duty Free Association. As chief of staff to the former minister for tourism, I had dealings with ADFA. They are a wonderful organisation—they are very serious about what they do and very dedicated to the duty-free sector. They understand its importance to the tourism industry. They were always welcome in the office of the former minister for tourism. They were seen as a very sensible organisation, and if they had something to say they would say it properly and base it on facts.

The Australian Duty Free Association had some concerns about the changes and they wanted to bring those issues to the minister's attention. They wrote to the Minister for Health on 9 March 2012, asking if the rumours they had heard through the media, that the government was planning on introducing the duty-free tobacco ban, were true.

The Minister for Health, the member for Sydney, did not even want to engage with ADFA. So what did she write on the letter? She referred it—just flicked it over to the Treasurer—and then wrote on the letter 'a minor organisation'. With all due respect, I would like to give some advice to the member for Sydney, the Minister for Health. Maybe she should stop the personal attacks on people in this place and concentrate on her day job, and she might do it a little bit better. Rather than going out with malicious attacks in the media about members in this place, she should concentrate on doing her job. Doing her job might include, when ADFA write to you, raising some issues which they would like thought about, considered and maybe addressed, rather than rushing out to do some media interview where you are just going to make some rather baseless, crude attacks on people's character, that, instead, you might say, 'I might spend that half an hour seeing ADFA, listening to their point of view, considering their point of view.' You might not agree with it. You might dismiss it. But at least you should recognise that they are an important organisation. They represent a significant part of the tourism industry and they deserve to be heard, not dismissed out of hand with some sort of flick of a pen of 'a minor organisation' over to the Treasurer.

It does bell the cat a little bit that maybe the government's whole objective here has been revenue raising, rather than trying to address this issue. I go back to the first point I made, that maybe we would not be here in the first place if those original cuts had not been made from this 'comical Ali' government, but at least they should give reputable organisations the time of day, not just flick them, in particular when it has been demonstrated that you do have the time to see these organisations, because you have got time to run out to do these press conferences, which can probably only be described as grubby or offensive. Just quit that. There is no need for it—concentrate on doing the work that you should be doing as the Minister for Health.

In that letter, ADFA did raise some concerns which I think are worth placing on the record. The shadow minister did that, but I would just like to make sure that we get them heard, because there is an impact on the duty-free sector as a result of these changes. They wanted it known that there are increased compliance costs for Customs associated with searching travellers with illegal cigarettes entering Australia at all airports. Treasury assumes a revenue gain of $200 million, yet Deloitte Access Economics' conclusion is a maximum of $42.1 million of revenue gain. Once again we see some issues being raised here. Treasury has said $200 million, and we all know they are under pressure. They are under pressure to make sure the government gets its surplus. What we need to do, and what needs to be looked at seriously, is to ask is there credibility in the Deloitte Access Economics conclusion of a maximum $42.1 million revenue gain, and is the government going to relook at the Treasury modelling to ensure that it is right. Otherwise, we are being told one thing by the government to try to get its surplus, yet another by Deloitte that it is only going to generate about a quarter, or even a little bit less than a quarter, of that revenue. I would ask the government to look seriously at that issue and come back and inform the parliament that their modelling is, in fact, correct on this.

There is going to be a reduction in tax revenue from duty-free operators, suppliers and airports as a result of the reduced profits and the reduced income tax paid by employees, as a result of the job losses that will inevitably occur.

There will be a 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 there is potential for increased black market activities. They are some of the serious concerns that ADFA wrote to the Minister for Health about. They are the concerns that she dismissed with the flick of a pen as coming from 'a minor organisation'. The Minister for Health should look again at the way she is going about running her portfolio if that is the attitude she is taking to these issues.

There are serious issues around this Customs Amendment (Smuggled Tobacco) Bill 2011. Once again, the way the government has gone about implementation leaves a lot to be desired. We do need to tackle the issue of the trade of illicit tobacco and the government has gone some way to doing that by changing the penalties, in particular the 10 years imprisonment. But the fact is that in the 2009-10 budget the Gillard government cut funding for the Customs cargo screening program by $58.1 million. At some stage, the government needs to understand the pressure that has been on Customs over the last three or four years and that Customs needs to be properly resourced. The government needs to come out and acknowledge that.

We need to see the government place on the record that the $58.1 billion that it cut from the Customs budget was a mistake and that it erred. It would not hurt for the government to do that. There are plenty of other motions at the moment where people are being called on to apologise. I cannot see why the government, if it is serious about apologising, cannot say, 'Okay, we got this wrong.' We need to get proper screening back in place. We have to make sure that the processes are there and that Customs are properly resourced, so it can do its job properly. In conjunction with that, we also need to increase the penalty for being caught in this area and make the maximum penalty 10 years imprisonment. That would be the type of sensible action that would indicate that the government was seriously committed to doing something in this area, instead of just robbing Peter to pay Paul, which is where we are as a result of the government's handling of this issue.

The coalition support the bill. We need to do everything we can to make sure that the issue of smuggled tobacco is addressed and that there are penalties to make sure that this crime does not continue to occur. We also have to look at the lessons learnt in getting where we are today with this bill, because unfortunately at every step it has been a story of incompetence and bungled handling by the Gillard government. One does hope that after so many programs and so many bungled pieces of legislation, one day we might be able to praise the government for having done something properly. I will not hold my breath, but we do live in hope.

Geoff Lyons (Bass, Australian Labor Party) Share this | Link to this | Hansard source

Thank you. I trust the self-praise does not continue with the next speaker. That could happen between the member for Makin and the member for Fowler, but we probably should get on with the question, which is that the bill be now read a second time.

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I also welcome the opportunity to briefly speak on the Customs Amendment (Smuggled Tobacco) Bill 2011. Firstly, I want to respond to some of the comments made by the member for Wannon. He asserted that as a result of the funding cuts to Customs, we have seen a spike in the sale of illicit tobacco and that that is why we have such a black market.

Just for the record, the facts show that in the last three years there has been a decrease in the volume of illicit tobacco from the total amount of tobacco in this country. The statistics also show there has been an increase in detections by Customs as a result of their operations. It just highlights that the member for Wannon is incorrect with his assertion in respect to the role of Customs in this matter.

The bill amends the Customs Act 1901 to create new offences of smuggling tobacco products and for conveying or possessing smuggled tobacco products. The new offences carry a penalty of 10 years imprisonment and a fine of up to five times the amount of duty evaded. The tobacco industry is big business and, contrary to trends in some parts of the world, it is growing. In Australia, around three million people over the age of 14 years smoke. According to a 2011 Deloitte report, commissioned by British American Tobacco Australia Ltd, Philip Morris Ltd and Imperial Tobacco Australia Ltd, tobacco global sales in 2011 were estimated to be US$780 billion, having risen from around US$646 billion in 2006. That is more than 50 per cent of the total Australian economy.

Similar trends for tobacco sales occurred in Australia, with the 2011 Australian market value of $10.7 billion comparing with $9.4 billion in 2006. Of course, in Australia that increase is more due to price increases than an increase in sales volume. The same Deloitte report estimated that in 2011 there were 2.264 million kilograms of illicit tobacco sold in Australia, representing 13.4 per cent of the market, and that over the past four years almost $1 billion of tax revenue had been lost. I suspect, however, that the tobacco companies' concern is not for the government revenue lost but for their loss of market share.

Regardless of their motivation, the fact remains that a black market trade in the order of $1 billion per annum raises serious concerns for government, including concerns about the formation of crime syndicates, bribery, theft, corruption, money laundering and violence. Of course, those figures are calculated estimates as no-one ever really knows what the value of the illicit market is, because there is no form of accurate statistics in respect to that sector of the market.

Notwithstanding that, I note that in 2010-11 Customs and Border Protection made 55 seizures of smuggled tobacco products in sea cargo, consisting of 258 tonnes of tobacco and 82 million cigarettes, representing a potential revenue evasion of $135 million plus GST. A similar amount of potential lost revenue arose from seizures made in the first nine months of 2011-12, again highlighting that the point made by the member for Wannon is inaccurate.

How much tobacco illegally enters Australia will never be accurately known. But there is little doubt that it is big business run by large criminal networks. Tobacco companies argue that increasing the price of tobacco products encourages a black market in tobacco products. The companies argue that the higher value means there will be more demand for cheaper black market products and, in turn, more profits for illegal operators. I accept that there is some validity to that argument.

According to one report that I have read, the World Health Organization has predicted that by 2020 illegal tobacco consumption will outstrip legal tobacco use. In other words, by 2020 the illegal tobacco market, using today's figures as somewhat of a guide, will be in the order of $600 billion, $700 billion or $800 billion around the world. It is indeed big business. The concern is that when you are dealing with that kind of money then quite clearly you are also dealing with other criminal concerns that need to be addressed, if, for no other reason than the continuing use of tobacco in society presents societies around the world with some very, very serious concerns and problems in the years ahead.

Increasing the penalties for offences relating to tobacco products should be a deterrent. But penalties must be part of a suite of measures including pricing, packaging, advertising and health warnings. It seems, however, that the most effective counter-smoking strategy to date has been the campaign to make smoking socially unacceptable by banning smoking in public venues and public places. A good study in respect of the effects of making smoking socially unacceptable was carried out in the US. It was shown to be the most effective strategy in reducing tobacco consumption. Whilst warnings on packets have been useful and increasing the prices might have assisted, the reality is that the biggest inroads in reducing smoking across the world have been achieved by those places that have made smoking socially unacceptable. We have seen that here in Australia where we have prohibited smoking in workplaces and recreation places. In my view, that has been the most effective strategy applied by governments. It is those kinds of strategies that I believe we need to continue with. As I highlighted a moment ago, we are dealing with a major problem around the world.

I take this opportunity also to commend an initiative between SANE and the Australian government which was announced yesterday by the Minister for Mental Health and Ageing, Mark Butler. This initiative is designed to assist people with mental health issues to quit smoking. People with a mental health condition are more likely to be smokers, with as many as 30 per cent of Australians with a mental illness being smokers. I understand that the figures are much higher for severe mental health conditions. It is the case that those people who are the most stressed and quite often the most desperate are the ones that turn to smoking for some form of relief. The reality is unfortunately that it has the opposite effect—it just makes people more stressed. If you are down and out, it also means that you spend your money on cigarettes when you should be spending money on much healthier options. I particularly note that, in the fact sheet referred to in Minister Butler's media release yesterday, it was stated that diseases caused by smoking are the second-largest killer of people who have a mental illness. This is an interesting statistic. The fact sheet also showed that people with mental illness who quit smoking may need a lower dose of antipsychotic medication. Again, this is an interesting observation in the fact sheet.

Finally, I want to comment on the reaction of the tobacco companies to their loss in the High Court challenge to the Australian government's proposition to ensure that in the future cigarettes are sold in plain packaging. I note that the cigarette companies have now turned to the World Trade Organization and appealed to that body to try and prevent Australia from proceeding with plain packaging for cigarettes. This highlights how significant an issue this is for these companies. It is significant because of the profits being made from the sales of tobacco. It is clearly the case that their concern is not only for the losses that they might incur here in Australia but rather that they fear that other countries around the world might follow Australia's lead and also introduce plain packaging for cigarette products. These companies are prepared to go to the World Trade Organization claiming that this is a breach of some of the trade agreements that we have with other countries in an endeavour to stop the government from proceeding with this proposition. I certainly hope that appeal is also lost by these companies. I understand that it might take some years to resolve, and that will not stop the government from proceeding with the legislation that was passed this year. However, it is of concern to think that every attempt is being made by the tobacco companies to continue to sell their products which they know have serious consequences for users.

As members of this House would know, the effects of tobacco have been known by tobacco companies for decades. In fact, I understand that in the US—and perhaps in other parts of the world, including, I believe, even here in Australia—there have been some successful cases where action was taken against the tobacco companies. Even knowing that tobacco products have serious health effects on consumers, they continue to promote and sell their products wherever they can and in whatever way they can, and I have no doubt that they will stop at nothing to ensure that they are able to continue to do so.

This legislation, as I said from the outset, forms part of a package of measures which not only seeks to prevent the illegal and illicit marketing of cigarette products but is part of a more comprehensive strategy to try and reduce smoking throughout this country. I commend the legislation to the House.

Warren Entsch (Leichhardt, Liberal Party) Share this | Link to this | Hansard source

As the member for Leichhardt, I have taken a very keen interest in measures to control illegal tobacco. I actually grew up in Mareeba, which was one of the largest tobacco-producing regions in Australia. In fact, one of my first jobs was working on tobacco farms, suckering tobacco, at about the age of 12, so I have a reasonable understanding of the legitimate industry and how it functions.

I welcome the opportunity today to support the Customs Amendment (Smuggled Tobacco) Bill 2012. It gives me the opportunity to highlight the concerns raised particularly by tourism stakeholders and others, such as the Australian Airports Association, the Tourism and Transport Forum and the Australian Duty Free Association, about this government's slapdash approach to policy. Of course, tourism is very much the lifeblood of the area that I represent—about 40 per cent of our economy—so we need to be very conscious of any negative impacts that we are likely to have on that industry.

In reading this bill, we must look at it in the context of the recent cuts to the duty-free tobacco allowances, which mean that people arriving at Cairns airport can now bring in two packets per passenger—this is down from in the past, hen it was a carton—as well as successive cuts to the budget of the Customs and Border Protection Service. Both of these make Cairns, and Australia, much more susceptible to quarantine risk and less able to give tourists a good first impression as they are waiting to be processed; by taking what they see as their duty-free allowance and removing it from them or opening the carton and handing them back just two packets of cigarettes. Of course, they do not get any reimbursement for the money they have spent on the whole carton.

The purpose of this bill is to amend the Customs Act 1901 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 that they were smuggled. Although a smuggling offence already exists under the act which is punishable by a fine of up to five times the duty that was dodged, this is no longer considered to seriously deter smugglers, as many of the fines imposed just do not get paid. On rare occasions, if enough evidence is found to warrant fraud charges being laid under the Criminal Code Act 1995, smugglers can face up to 10 years imprisonment.

These new criminal offences will combine the penalties of the existing smuggling and fraud offences. This means that people who knowingly smuggle tobacco products will face not only the existing fine but also up to 10 years imprisonment. This will certainly provide a strong deterrent to criminals and illustrate the seriousness of these smuggling acts. In the 2009-10 budget, Labor cut funding for the Customs cargo screening program by $58.1 million. The result of these cuts is that the number of sea cargo inspections was cut by 25 per cent and air cargo inspections were reduced by 75 per cent.

With less cargo being screened, there is a greater opportunity for illicit tobacco to be smuggled through our borders. Just this year, an industry-commissioned report into the illicit trade of tobacco in Australia confirmed that illegal tobacco is a real and significant threat. It found that in 2001 our illicit market totalled around 2.26 million kilograms of tobacco, which is equivalent to 13.4 per cent of the estimated legal tobacco market. Illegal tobacco takes many forms: there is duty-free diverted product; there is the counterfeit product, normally originating in China; there are unbranded tailor-made cigarettes; and loose-leaf, or what we commonly know as chop-chop, that has been grown illegally in Australia.

Tobacco is no longer grown legally in Australia. The Howard government was pleased to support efforts to close the legal growing market in Australia. They saw the buyout of many of the licences on farmers, and effectively paid out those licences in the northern area, in my area, and allowed them to diversify into other areas. A little later, the Victorian industry shut down as well. This was done to safeguard revenue and to reduce the toll from the more harmful and illegal chop-chop market. The illegal chop-chop market was only driven by a few rotten eggs in the tobacco-farming sector, those responsible for diverting products from legal channels. Farmers who shut down their crops were given two years profits by Australian manufacturers in return for cooperating with the authorities, and they were rightly given support as they worked to switch production into other crops.

I say this to highlight that, in its tobacco control reforms, the coalition acted with a great deal of engagement, planning and care to avoid unintended consequences; after all, the hallmark of creating good policy is that it is sensible, workable and evidence based. Our policy was driven by decision making at the Tobacco Industry Forum, which was established by the coalition and is made up of groups that have a keen interest in the tobacco industry. These included the Australian Taxation Office, the Customs and Border Protection Service, the Department of Health and Ageing and the Australian Quarantine and Inspection Service. Its purpose was to provide a forum for consultation and discussion on issues of mutual concern. By taking a planned approach, we made sure that we were not subject to the embarrassment that typifies this government's knee-jerk policy forays and flights of fantasy. By introducing measures such as the graphic health warnings on cigarettes, the Howard government achieved the lowest rates of smoking in the Western world.

We are yet to measure the impacts of this government's plain packaging legislation that will see consumers downgrade to cheap unbranded cigarettes, but it is likely that this will see increased consumption of tobacco in the absence of minimum retail price for that tobacco. This legislation will also make detection of illegal tobacco more difficult. Brand colouring, embossing and other distinguishing features being replaced by a standard form of packaging is going to make counterfeiters' work much, much easier.

At the same time, government is encouraging smuggling by taking the cops off the beat at airports, while restricting importation via duty-free stores. I have a media release from the Australian Duty Free Association issued after the May budget, when duty-free reform was introduced without any consultation with the Australian Duty Free Association or other important travel or tourism stakeholders. In her 8 May media release, the minister was gloating that this reform:

… reduces the number of tax free cigarettes that can be brought into the country and brings duty free tobacco into line with the Government’s tough stand on reducing tobacco consumption …

Yet, after buying into the issue and posturing over her tough stand, the minister has now run away from this issue—since it has become obvious that it was conceived without proper planning. This is the standard that was set by the previous Prime Minister—it was a reason he was removed from the front bench—yet the standard has been retained and if anything it has grown worse under this current government.

When ADFA wrote to the health minister, the member for Sydney, she did not bother to engage with them, describing them in a leaked handwritten note as 'minor stakeholders'. This is the peak body for the duty-free stores throughout Australia and certainly not a group that could be trivialised as a minor stakeholder that can or should be ignored. In recent media releases the director of the Australian Duty Free Association, Derek Larsen, states that this measure will radically slash the allowances for duty-free tobacco, with serious implications in the duty-free sector, and it represents a black hole that is approximately 7.5 per cent of the total budget surplus. He also highlights that the government has overstated the available revenue from the measure by around $110 million in 2013 and increasing to $140 million per year thereafter. He adds: 'The total sales revenue generated from duty-free tobacco is far less than the amount that the government estimates it can raise by ending the duty-free concession. It wants to reap more tax revenue from the sector than is generated in total sales.' Quite clearly this is absolutely impossible.

Importantly as it relates to this bill, Mr Larsen warns that Customs are likely to be heavily impacted by the move and Customs officers will have to dedicate more time to policing the quantities of cigarettes being imported. This will put extra strain on frontline Customs services, which are already working hard to process arriving passengers in a timely manner. As you can appreciate, Mr Deputy Speaker, it will also have a very negative impact on visitors' experiences entering Australia, assuming they are doing the right thing and purchasing their duty-free products at the airport. This is on their arrival in many cases before they go through Customs, and they then find that the product that they have legitimately purchased is removed from them and they are given only two packs.

In my view it is also very much likely to lead to a very significant increase in the black market trade in tobacco. Now that the Australian tobacco industry is virtually shut down, the opportunities for illegal chop chop coming out of Australia have been significantly reduced and this is highly unlikely. But what we are going to see is much more illegal product being imported in larger quantities. We have seen that in recent times, coming probably through our docks.

It is in desperation for a headline and reaching for a measure to prop up a fake surplus that this government is doing untold harm and denying a voice to its collateral victims. Duty-free sales constitute about one per cent of the tobacco industry sales, yet tobacco represents up to 30 per cent of duty-free sales. In its attempt to hurt the tobacco industry, it is instead damaging those who sell it legally. It is also encouraging the illicit trade.

In the absence of the health minister doing the job, the duty-free sector knocked on the door of Mr Ferguson, our minister for tourism. The duty-free sector informs me that that meeting lasted a total of seven minutes. This is a very clear message that if you are in tourism or tourism connected business and not with the resources and energy sector, the Minister for Resources, Energy and Tourism does not want to hear about your problems and is not available to assist in dealing with these serious issues for your sector. The minister for health, the minister for tourism or someone on the government side needs to come to the chamber in the course of this debate and answer some very serious questions as they impact on smuggling tobacco.

What is the progress on the reprinting of landing cards, at what cost, and why was the estimated cost of $10 million not included in the 2012 budget? What was the involvement of AQIS and what budget plans are in store to destroy the confiscated product? How will this product be treated and where was it purchased? Retail or abroad? What was the full price? What information program is planned for the tourism source markets and why has the government opted not to progress this policy idea without open lines of communication with the industry that has been so heavily impacted? What is the implication for increased waiting times additional to the impact of the Customs staff cuts, and when will these be reported to parliament? Now that crucial sentences will apply to tourists who hide extra cartons in their luggage, what assurance is there that this legislation will apply only to large-scale organised criminal gangs? Finally, when will the election be called— (Time expired)

Kirsten Livermore (Capricornia, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to speak on the Customs Amendment (Smuggled Tobacco) Bill 2012. In beginning my remarks I take issue with one of the opening remarks of the member for Leichhardt, in which he characterised the government's approach to this as a 'slapdash' approach to policy. That is the last criticism that could be made of the government's approach to these measures to reduce rates of smoking in Australia. In fact, this bill and the other measure that the member for Leichhardt spent a great deal of time on in his speech—the reduction in the number of tobacco products that people are allowed to bring into Australia duty free—are two measures that are part of a much larger, comprehensive suite of measures that this government has been pursuing since we first came to government. As speakers throughout this debate have made reference to, these are measures that were identified and recommended by the National Preventative Health Taskforce.

So not on any measure could you characterise this bill or, indeed, any of the other measures we have put into place as a slapdash approach. It has been very clear since we came to government that the Labor government was intent on continuing the efforts of previous governments to reduce the rates of smoking in Australia. There are very good reasons for doing that in terms of the health and lifestyle of our Australian citizens, but as a government we also have a responsibility to make sure that our health dollars are spent wisely and that we do what we can through regulation and support for people to have our rates of smoking as low as possible in Australia. The health effects of smoking are well known and create a very large burden on our health system if not addressed.

I talked about the Preventative Health Taskforce. It was one of the early acts of the Labor government to put in place a preventative health task force to look at this whole question of how to improve health outcomes in Australia and thereby improve people's life outlook, and also to make the best use of our health dollars. The Preventative Health Taskforce report is very interesting reading, and one of the lessons that it contains was very informative to me.

In Australia, we are used to being world leaders in tobacco control and in the regulation that applies to tobacco companies in marketing and selling their deadly products. While we can congratulate ourselves on our achievements to date—in 1988, roughly 30 per cent of Australian adults were smokers; we have brought that down to the current rate of below 20 per cent—one of the things that the Preventative Health Taskforce warn against is complacency by the government and in Australia generally because of what has already been achieved. In their report to the government, they warn against a loss of momentum in national efforts to lower rates of smoking. One thing that really caught my attention in the report was the following statement:

… there has been a 'flattening out' in the reduction in the prevalence of smoking rates in Australia …

It goes on to say:

Between 2004 and 2007 prevalence of weekly rates fell by only 1.1 percentage points (6%), compared to a drop of 2.1 percentage points (9%) over the previous three years.

So the very clear warning in the Preventative Health Taskforce report is that, while there is effective regulation and government efforts have had a very big influence on rates of smoking, we cannot take our eye off the ball. We cannot let up in our efforts in this regard. We cannot be complacent because, as has been demonstrated very clearly in the last couple of years as the government have stepped up efforts against the tobacco industry, we are up against a very powerful, well-resourced, ruthless and unscrupulous opponent in the tobacco industry, which will stop at nothing to protect its vested interest in keeping people smoking and especially in luring young people and others to take up smoking and therefore become addicted to the products that tobacco companies sell.

That warning from the Preventative Health Taskforce is very clear. Yes, we should recognise and applaud our previous achievements and results, and we should take from them the message that strong regulation can have a big influence on smoking rates, but we cannot rest on our laurels. We have to maintain our focus on what governments can do by way of regulation, by way of social marketing et cetera to reduce the rates of smoking.

As I said, I refute the member for Leichhardt's claim that the government have taken a slapdash approach to this policy. This bill, like all those before it, is part of a very comprehensive suite of measures that have all been recommended and backed up by the work of the Preventative Health Taskforce.

The bill specifically amends the Customs Act 1901, creating new offences for smuggling tobacco products and for conveying or possessing smuggled tobacco products. Significantly, this bill adds a new penalty for those offences. Up till now, someone found guilty of smuggling tobacco products into Australia—bringing in tobacco products without declaring them properly and defrauding the Commonwealth of customs duties—had to pay a fine. But we found that those fines were not being paid. I think there is something like $45 million worth of unpaid fines at the moment. So the government are stepping up our efforts in this area—not only on the basis of common sense and the fact that we do not want people defrauding the Commonwealth of customs duties but also on the basis of advice given to us by the National Preventative Health Taskforce—to further reduce the rates of smoking.

So we are adding a penalty of 10 years imprisonment for these offences and expanding the offences in the customs area.

As I said, this bill represents one more element of the government's approach to reducing rates of smoking. We cannot talk about this in parliament today without making reference to the decision by the High Court last week to back up the government's groundbreaking and world-first measure to introduce plain packaging. It is great to have the Attorney-General here in the chamber, as it allows me to congratulate her on the fight which, on our behalf, she took on, and for her very strong advocacy—advocacy which has been recognised right around the world and advocacy which has clearly spooked the tobacco industry.

They know that our introduction of plain packaging in Australia has sent a very clear signal to other governments around the world who want to step up and implement similar measures. The Attorney-General has mentioned that governments in Norway, France, Uruguay, New Zealand, South Africa and even China are taking very close notice of what we have done in Australia. The efforts of the tobacco companies to keep finding markets for their lethal products are very transparent, as is their blatant pursuit of self-interest in continuing to try to get new people addicted to the smoking habit. There is just no excuse for their continued efforts to fight, in the WTO and through the actions taking place in Hong Kong, against the government's legitimate measures.

I applaud the government's efforts. As I say, this bill is just one of a whole range of measures. One of the most important measures was the 25 per cent increase in the tobacco excise back in April 2010. That has already seen a reduction in the smoking rate. We have also listed nicotine replacement therapies on the Pharmaceutical Benefits Scheme. On the one hand, through the excise increase, we are making it more expensive for people to buy tobacco products and, through that measure, we are discouraging smokers—especially young smokers—from taking up the habit. We are also generating a financial incentive to quit for people who are already habitual smokers. On the other hand, through the PBS measure, we are making it easier for people who want to make the decision to quit to take up therapies—giving them a better chance of successfully quitting.

In conclusion, I want to congratulate the Attorney-General and the government for these measures. It is obviously better for their own health outcomes if people do not take up smoking or, if they are already smokers, if they quit. But the government have a responsibility to spend our health dollars in the wisest way possible. Where we see a major cause of preventable death—and smoking is the biggest of those—we have to take every step we can to combat it. This bill is just one more of those measures.

The member for Leichhardt spent a lot of time on the question of duty-free cigarettes being brought into Australia. He characterised the government's steps to address that as 'slapdash measures'. It is actually specifically referred to in a recommendation from the National Preventative Health Taskforce. In fact, the National Preventative Health Taskforce said that we should get rid of it altogether.

So taking the step that the government has elected to take, going from 250 grams down to 50 grams, is, on any measure, a reasonable response to a very considered recommendation from the National Preventative Health Taskforce. For the usual vested interests to jump up and down without taking a broader look at what is at stake, either in terms of people's health or the right of the government to improve health and spending outcomes in Australia, is extremely short-sighted and not one that the government is going to be swayed by.

Nicola Roxon (Gellibrand, Australian Labor Party, Attorney-General) Share this | Link to this | Hansard source

I would like to acknowledge the member for Capricornia and other speakers, the members for Hindmarsh and Makin, who talked about the Customs Amendment (Smuggled Tobacco) Bill 2012 in the context of the range of things the government is trying to do in tackling tobacco. I might note, before the member for Capricornia leaves, that I think the chair, the member for McEwen, might have been worrying in that discussion, as one of the few smokers in parliament. I know he has said at different times that he might think about whether he will try to give up what is a serious addiction and, of course, the chair and the member for Corangamite would know that they would have our support and encouragement.

We acknowledge and understand that this is an incredibly addictive habit. I was interested that the Minister for Health, in her contributions recently to this debate, had some figures I had not heard previously that 80 per cent of current smokers were addicted before they were 19 and something like 95 per cent were addicted before they were 26. This is an active strategy from tobacco companies—to have people addicted early and often for life. We acknowledge and understand why this sometimes is an uncomfortable area for people who are smokers, but I have to say that the member for McEwen—and we have talked often about this—has been a big advocate of the measures we have been taking. I still have not met a smoker that wants their child to smoke, so we know that this is something on which we can make a difference over generations.

The Customs Amendment (Smuggled Tobacco) Bill 2012 is part of that. Obviously we want to make clear that the health risks are the same whether you smoke legal tobacco or illegal tobacco. We do not accept the tobacco industry's view that in Australia we have a large problem with illicit tobacco, but we do accept that measures should be taken to make sure that that does not grow over time. This is one of the odd occasions where the tobacco industry and the government agree that introducing these new penalties and offences is actually an important part of making sure we have a comprehensive response to tobacco related issues generally. The proposed amendments to the bill that are being debated here are about strengthening the offences, introducing for the first time a penalty with imprisonment attached to it for tobacco smuggling, more accurately reflecting the seriousness of the offence and providing a stronger deterrent to criminals, not to make them think this is an easy or a safer way to make money. It is, as members on this side of the chamber have mentioned, part of a much more comprehensive approach that the government is taking to tobacco generally. I would not like to miss the opportunity to say how pleased the government has been that the High Court last week upheld the decision that the government has taken to introduce plain packaging. It, our social marketing campaigns, our increase in excise and our targeting of the Indigenous community, where smoking rates are still very high, are all part of one package to make sure we do everything we can to reduce each and every year the number of people who lose a loved one to a tobacco related illness.

It is another sign that the government is prepared to do what needs to be done, whether it is taking on tobacco and winning, whether it is pricing carbon, whether it is the National Broadband Network, whether it is the National Disability Insurance Scheme or the education reforms by my colleague the minister for education, who is in the chamber. All these reforms show the government's preparedness to get on with work that is important and I am proud that we are doing that.

We have, as I have said, made quite clear that we agree that any type of tobacco is dangerous and, if we can do anything to reduce the smoking of tobacco, we will obviously do that. As a number of speakers have pointed out, this bill aims to deliver the very strong message that serious jail time will ensue if people are involved in illegal tobacco smuggling into this country.

And it makes sure that the offences are now not just general smuggling offences or serious fraud offences against the Commonwealth but are in line with those. They are drafted specifically for that purpose. The need for the bill was recognised by the Senate Legal and Constitutional Affairs Legislation Committee that considered the bill and recommended that it be passed. I thank the senators for consideration of the bill.

I would like to briefly address some issues raised by the members for Stirling and Wannon, referring to the reduction in duty-free concession from 1 September this year and the impact this will have on Customs. The government have committed over $11 million over the next two years to assist the Customs and Border Protection Service to implement this change. In their speeches, the members for Stirling, Wannon and Leichhardt were critical of the government for 'cutting funding to Customs'. The facts are that we have invested $4 billion in Customs over the past four years and we will invest another $4 billion over the next four years. We spend more than $1 billion every year on Customs and it is getting results. Briefly, and to not stray too far from the topic of this bill, last year we seized more heroin, cocaine and amphetamines than ever before.

If people want to look at the different results: in 2007, the last year of the Howard government when untargeted and mass-screening systems were used, Customs detected 870 parcels containing drugs or other prohibited items; last financial year, using criminal intelligence and targeted screening, Customs detected over 1,800. So we have gotten smarter in the way that we do this Customs work. The member for Stirling asked why the government are not doing more to educate the public as to the dangers of illicit tobacco. It is a little rich to suggest that our government have not been doing enough to talk to people about the dangers of tobacco. It was a cheeky suggestion, I think, from someone who has been less than enthusiastic about the other steps we have taken in this tobacco control area.

The Customs Amendment (Smuggled Tobacco) Bill 2012 ensures that we have the right laws in place to continue the fight against illegal tobacco and is part of our ongoing commitment to combat smoking in all its forms. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.