Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That all words after "That" be omitted with a view to substituting the following words:

"Whilst not declining to give the bill a second reading, the House notes that the Coalition continues to accept donations from tobacco companies".

The coalition is yet to kick the habit. The coalition continues to accept donations from big tobacco. Australian Electoral Commission returns from 2015-16 show the sum of $14,940 given from big tobacco to the National Party of Australia. The returns from 2016-17 show the sum of $15,700 received by the National Party of Australia. I seek leave to table the Australian Electoral Commission returns showing these tobacco donations to the Nationals.

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

Is leaved granted? Leave is not granted.

Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Well, there you go. That says it all, doesn't it? They're willing to take money from big tobacco, but they're not even willing to allow me to put on the record the electoral returns that show very clearly the amount of money that the coalition received from big tobacco. The Prime Minister needs to explain why he thinks it's acceptable for his coalition partners to fill their coffers with donations from an industry that profits from a product that, if used according to directions, will kill more than half its users.

While these donations continue, Senator McKenzie's position as Minister for Rural Health is completely untenable. Smoking is the single highest preventable cause of ill health and death in Australia, accounting for more than 15,000 deaths each year. The likelihood of being a daily smoker is up to twice as high in rural and remote Australia as it is in metropolitan areas. And yet the National Party continues to accept money from big tobacco, despite the additional harm that smoking-related deaths do in rural and regional Australia. We see by contrast Labor's longstanding policy not to accept donations from tobacco companies—a position that is reflected in our national platform.

We introduced and we fought for world-leading plain-packaging legislation, which, combined with other policies, has seen the adolescent smoking rate drop to a record low. I was here in this place watching how the coalition behaved as that plain-packaging legislation made its way through. You could see early on that they wanted to vote against it. They were doing their level best to square up to vote down plain packaging. In the end they finally did the right thing, but they had to be dragged kicking and screaming to a point of supporting plain-packaging laws, which are now being looked at by countries around the world, who are asking themselves the question, 'How do we reduce smoking rates in our country too?' This is a government that lacks credibility on tackling big tobacco.

These measures today are uncontroversial. The amendments made in this bill create a new tobacco offence regime, providing a comprehensive set of offences that apply to illicit tobacco that has been domestically manufactured or produced or for which the origin of production or manufacturing is unknown or uncertain. They create new offences for possession of equipment for producing or manufacturing illicit tobacco. They set penalties at a level that will deter illegal activity. They confirm that illicit tobacco for which the origin of production or manufacturing is unknown or uncertain can be seized and forfeited. They define 'tobacco' to align the meaning for excise and excise-equivalent customs duty purposes so the amount of duty on dutiable products is determined in a consistent manner. These measures are simply integrity measures that put beyond any doubt that it is possible to crack down on illicit tobacco, whether domestically manufactured, manufactured overseas or for which the origins are unclear.

It is Labor that has been leading on this issue. In the 2016-17 budget the Abbott-Turnbull government accepted Labor's policies to increase excise and excise-equivalent duties on tobacco. We see those measures continue to improve the health of Australians and continue to improve the health of the budget. If the coalition are to show that they are utterly serious on this, they need to stop the donations from big tobacco. They need to be willing to put their hand out and say: 'We're not taking your money anymore. We are serious about cracking down on smoking-related deaths.' The day that the coalition cease to accept money from big tobacco is the day they can come in here with their heads held a little higher and the day on which they can say that they are finally taking a serious stand against a product which, if used as intended, kills more than half of its users. This bill will receive Labor's support, but we urge the coalition to do the right thing and stop accepting tobacco donations.

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

Is the amendment seconded?

Shayne Neumann (Blair, Australian Labor Party, Shadow Minister for Immigration and Border Protection) Share this | Link to this | Hansard source

I second the member for Fenner's second reading amendment and support the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018. I reaffirm my support and Labor's support for improving health outcomes for all Australians. The proposed amendments provide a comprehensive set of offences relating to domestic manufacture or production of illicit tobacco and the possession of equipment for the purpose of producing or manufacturing illicit tobacco. They set higher penalties to deter illegal activity and allow enforcement agencies to seize and forfeit illicit tobacco with no known origin of production or manufacture.

Labor will always strive towards eliminating smoking related illness and death. We have a proud record in government. We increased the rate of tax on tobacco by 25 per cent and we introduced the world's first and far-reaching plain packaging on cigarettes. The latter has been lauded by health agencies around the world. That is in contrast to those opposite, who continue to take donations from the tobacco lobbyists and industry. While the Prime Minister seems distracted by his National Party colleagues' dysfunction and disillusionment, he remains silent on the tens of thousands of dollars in donations the National Party receives from big tobacco annually. I represent a regional and rural electorate in South-East Queensland. I was discouraged as a local member to learn that the rate of smoking in regional and rural areas, particularly in remote parts of Blair, is almost double the rate of the urban part of my electorate in Ipswich. The National Party, particularly in my home state of Queensland, claim to represent people in regional and rural areas, but they fail regional Australia by taking donations from an industry which profits from a higher rate of tobacco related illness and death in regional and remote areas.

Smoking accounts for more than 15,000 premature deaths of Australians annually. These deaths are preventable. Labor in office have made significant advancements towards reducing that number. We continue to reject donations from the tobacco lobby, a position reflected in our policy and platform. Labor stood up to big tobacco in 2011 and introduced the Tobacco Plain Packaging Act, making Australia the first country in the world to mandate plain packaging for tobacco products. It wasn't always popular locally in my electorate or around the country, but many countries have since followed our example, including France, the United Kingdom, New Zealand, Norway, Ireland and Hungary. The impact of the changes Labor introduced is being noticed and will continue to be evident, I think, for generations to come.

There is a wealth of evidence available which shows that plain packaging discourages the take-up of smoking, particularly amongst young people. The Australian Institute of Health and Welfare's National Drug Strategy Household Survey of 2016, released mid last year, found that the proportion of Australians who have never smoked continues to rise from 60 per cent in 2013 to 62 per cent in 2016. I count that as one of the most important decisions I have personally made in my life. As a father, I'm thankful that my daughter's generation is less likely to suffer from the devastating effects of tobacco related illness and disease. I'm proud that a Labor government I was part of played a tremendous role in that outcome. The Turnbull government need to ensure they are taking every available measure to reduce the rate of smoking amongst older people. The survey referred to found that, since 2001, the rate of smoking amongst 18- to 24-year-olds has reduced by half. However, for 60- to 69-year-olds, the reduction in the number of smokers was less than 10 per cent.

The greatest opponents of our plain packaging legislation were the tobacco lobbyists and companies. We were criticised by Philip Morris International. We were criticised by British American Tobacco. We were criticised by Imperial Tobacco. But we were applauded and lauded by the World Health Organization and the Cancer Council of Australia and similarly by governments around the world who followed us and set about implementing similar laws. Meanwhile, those opposite continue to take donations from those people who profit from tobacco related illness and disease, particularly in rural and regional Australia. I think this is another example of Liberal Party and National Party members saying one thing back home and another here.

As the shadow minister for immigration and border protection, I'm delighted the government's adopted Labor's policy to increase excise and excise-equivalent customs duty on tobacco in the 2016-17 budget. Last year, Labor supported the Excise Tariff Amendment (Tobacco Duty Harmonisation) Bill 2017 and the Customs Tariff Amendment (Tobacco Duty Harmonisation) Bill 2017. These amendments ensured that roll-your-own tobacco attracts the same rate of excise per kilogram of tobacco as cigarettes. Labor has consistently acknowledged a strong stance on the importation of tobacco related products discourages consumption at home and reduces people's exposure to tobacco products. This significantly improves the overall health of all Australians.

Our attention now needs to be turned to decreasing the rate of production and manufacture of illicit tobacco for domestic sale. The British American Tobacco company, in its submission to the Joint Standing Committee on Law Enforcement inquiry into illicit tobacco stated: 'The excise lost due to illicit tobacco is estimated at $1.49 billion annually.' They imply that, based on the current rate of illicit tobacco consumption of 2.4 million kilograms, an increase in excise could increase revenue from tobacco products to over $3 billion per annum by 2020. This amounts to almost one full per cent of total government revenue. Of course, the best health survey result is always for people to quit for good. The now Department of Home Affairs in evidence to the inquiry into illicit tobacco stated:

The strike team has … built stronger ties with key international law enforcement partners involved in combating tobacco smuggling at various points along the supply chain.

The Australian Border Force has been working to strengthen offences to allow officers to address offenders within the full spectrum of the illicit tobacco trade. I have spoken to ABF people on the front line and across a whole range of areas and been constantly impressed by their competence, diligence and commitment to duty. I welcome the moves for the ABF to be more investigative and more disrupting of illicit tobacco trade, providing a greater deterrence. While they're at the front line doing the work, that clearly provides a deterrence for those people involved in criminal activities in the space.

This issue really isn't about loss of revenue or public health; it's more than that. The Australian Border Force has strong evidence providing links between the illicit tobacco trade and serious organised criminal groups. The illicit tobacco trade undermines the Australian government's strategies in terms of prevention and control of tobacco products. At Monday's Senate estimates hearings into the now Department of Home Affairs, the Acting Commissioner of Australian Border Force, Michael Outram, revealed that the tobacco strike team had seized in excess of 104 tonnes of smuggled tobacco and 233 million smuggled cigarettes since it was established. It is the equivalent of $232 million in revenue and immeasurable savings, can I put it that way, to the public health of Australians. This is clearly a vital measure in cracking down on the scourge of illicit tobacco in Australia. I thank them for the work they're doing.

Those opposite claim they're committed to cracking down on illicit tobacco but evidence at the Senate estimates revealed otherwise. The Acting Commissioner of the ABF revealed the tobacco strike team is 'a lapsing measure that lapses at the end of this financial year'. Rather than continuing what the Acting Commissioner described as an incredibly successful program, the Turnbull government has not funded the tobacco strike team beyond July 2018. I would urge them to have a rethink in this space and to fund the tobacco strike team of the ABF, which have clearly been successful in the work they do. I urge the government to have a rethink in this space. They need to act. They need to start acting in the Australian people's best interests. If they want to see immeasurable improvements in public health, illicit tobacco must be stopped at our borders. They must fund this strike team. In the same budget which handed tax cuts to big business and multinational companies, the Turnbull government has failed to commit to fund a program which is aimed at stamping out illicit tobacco imports and preventing tobacco-related illness and disease.

The health of all Australians depends on a common-sense policy when it comes to the sale and excise of tobacco products. The Australian Institute of Health and Welfare National Drug Strategy Household Survey 2016 found that 25 per cent of smokers would be motivated to give up smoking if the cost of tobacco products were to rise—the law of supply and demand. If the price rises, people have a disincentive to take up smoking. Fifty-two per cent of smokers who attempted to quit or change their smoking behaviour identified the cost of tobacco products as the predominant motivating factor.

Leading the world in introducing plain packaging for cigarettes was only the beginning of Labor's achievements in targeting tobacco related illness and disease. In government, Labor previously introduced other key measures. I'm going to go on the record because I think it's very important to note. We increased the excise rate applying to tobacco products by 25 per cent as early as the 2010-11 budget. We introduced legislation restricting internet advertising on tobacco products, consistent with advertising restrictions in other media—another important reform. We put $61 million towards the national tobacco campaign 'Every cigarette brings cancer closer'—a successful campaign. We provided $27.8 million, over four years, for social marketing campaigns targeted at high-risk and hard-to-reach groups. We provided $14.5 million, over the three years from 2008, and a further $10.7 million from 2010, towards the Indigenous Tobacco Control Initiative, which funded 18 pilot projects in Indigenous communities around Australia. Tragically, the rate of tobacco consumption remains frustratingly high, but it is certainly on a downward trajectory with respect to Indigenous groups across the country. We put $100.6 million towards the COAG National Partnership Agreement on Closing the Gap in Indigenous Health Outcomes 'Tackling Indigenous Smoking' measures. There was 'Break the chain', the first ever Aboriginal and Torres Strait Islander specific national anti-smoking television campaign, $5 million in one-off funding for Quitline in 2009-10, and $102.4 million to support nicotine replacement therapies and other quit smoking supports through the Pharmaceutical Benefits Scheme.

We have consistently shown our commitment to policies which reduce the incidence of tobacco related illness and disease in this country. I'm pleased to see that our excise increases when we were in government have been adopted by the Abbott and Turnbull governments when they came to power. However, this is also a government that has sadly and tragically discarded the 'Every cigarette is doing you damage' campaign, which has existed in this country since 1997 and has received global praise for its effectiveness. That's a very bad decision by this government. In the first three years of the Turnbull government, the AIHW survey found that smoking levels had dropped only marginally compared with the significant differences recorded in the preceding two decades—under both sides of government.

Those opposite are simply not doing enough to reduce the devastating impact of tobacco related illnesses and disease in Australia, particularly among lower socio-economic and regional Australians. We remain committed to ensure the current government is held accountable for any underhanded and underdone treatment of tobacco companies. We're supporting the passage of this bill through the House. We believe it will deliver a high standard of health outcomes to Australians. But it's not enough. Much more needs to be done. This government must give greater emphasis to preventive health. Reducing tobacco consumption in this country for older and younger Australians and for regional and rural Australians in my electorate and elsewhere is an important goal.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I'm pleased to rise to speak on the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018. I start my contribution to this debate by admitting that I am a fanatical nonsmoker—with the greatest respect to some of the other members currently in the chamber. My nose is extraordinarily sensitive to cigarettes. If someone lights up a cigarette 100 yards away from me, my nose can actually sense it. It causes me discomfort and irritation. So I would be very glad to see the smoking rate in this country driven down to zero and for all those involved in the tobacco industry to put their productive and entrepreneurial works and skills into other efforts. However, the policies that have been adopted by this parliament, and they were bipartisan policies, were to go down the track of trying to reduce the rate of smoking—something that, as I said, I'm all in favour of—by effectively introducing a prohibition by price.

I can remember standing in this chamber a couple of years ago when we had a similar debate on this, and there were members of the Labor Party who refused to acknowledge that, if we were going to increase the retail price of cigarettes by increasing the excise on them, this would lead to a surge in black market activity. There were members of the Labor Party that simply refused to accept that fact. What have we seen since? We've seen that this actually has done exactly that. There must be an acknowledgement by this parliament that, if we are going to go down the track of introducing what is effectively a prohibition by price, that will result in a lot more black market activity. It will create a profit motive for those involved in smuggling activities, attracting them to cigarettes, and we will have to respond by putting a substantial portion of the increased revenue that the Commonwealth is going to receive into law enforcement activities. That's why this bill should be commended, because that's the problem that it tackles.

I had the fortune to go on a delegation overseas last year. I went through Dubai airport. I had a look at the cigarettes to see what the prices were. I could have bought a packet—or several packets; it was three cartons packed together, and it was on special—of Benson & Hedges for A$1.67 in Dubai airport. Yet the bipartisan policies of this parliament are going to increase the price of a packet of Benson & Hedges up to $40 with the excise increases. Already—some may be able to inform me a little bit better—I understand a packet of Benson & Hedges at the moment is around $25 in Australia, the highest price of cigarettes in the world. That, of course, can only attract black market activity, with such massive discrepancies in the manufacturing costs of a packet of cigarettes. You can buy them lawfully in an overseas country, which is a big difference from illegal drug smuggling, where illegal drugs are produced unlawfully in the country of origin, sold on the black market unlawfully and shipped unlawfully to Australia. The whole process is illegal, but, when it comes to cigarette smuggling and importation, the manufacture and sale of those cigarettes in the country of origin is a lawful activity. It only becomes unlawful when those cigarettes are shipped to Australia and a fraudulent customs declaration is made.

We can see how this has fuelled the illegal activities of the black market from the work of the Tobacco Strike Team. In their first two years of operation, they seized more than 400 tonnes of illegal tobacco, worth more than $300 million in lost duty. The coalition were the ones that put forward the money to fund that Tobacco Strike Team, so it's very pleasing to hear members of the opposition suggesting that we should increase or continue the funding for that when it was the coalition government that actually put that funding initially. The Labor Party were the ones that introduced the original excise increases but did nothing to crack down on the increase of illegal activity, which anyone with common sense would have understood would be the natural consequence of such a policy.

That's why this bill deserves support. We are increasing the penalties for illegal activity. We know that the illegal activities are going to ramp up every time we ratchet up the duties and the excises. Every time lawful cigarettes become more and more expensive, there'll be greater and greater black market activity. So, if we are going to go down that track, which is the bipartisan position of this parliament, we have to respond and put the appropriate resources into law enforcement to make sure they have the resources they need and also to make sure that the penalties are appropriate. That's what this bill does—it increases those penalties, and they do need increasing. I know in my electorate that you can drive to almost any suburb and go into a tobacconist and purchase an illegal packet of cigarettes for around $10—less than half the price of a lawful product. What will happen when we make the price of those lawful cigarettes $40? It will only, again, further incentivise the black market.

The question is: is this having a great effect on the reduction in the rate of smoking? An article in The Australian on 14 August last year noted:

The number of smokers in Australia has increased for the first time since anti-smoking campaigns ramped up a generation ago, casting doubt on the effectiveness of further taxes on cigarettes.

It continues:

An unexpected standstill in the national smoking rate since 2013, combined with rapid population growth, has pushed up the number of regular smokers by more than 21,000 to 2.4 million according to Colin Mendelsohn, an expert in public health at the University of New South Wales, who says Australia’s "punitive and coercive" policies to curb smoking have "run out of steam".

So, if we are going to continue to drive down that rate of smoking that all of us, whichever side of this chamber we sit on, want to see, this bill goes a long way to going down the track of increasing penalties, but we also have to acknowledge that a lot more needs to be done in this space. We need to look at what resources our Australian Border Force need. We need to continue the work of the Tobacco Strike Team to ensure that they are appropriately resourced. That is the only way we are going to continue to drive down the rates of smoking in this country. I commend the bill to the House.

Jason Wood (La Trobe, Liberal Party) Share this | Link to this | Hansard source

I would also like to congratulate the member for Hughes for being chair of the inquiry which looked into the need to investigate illicit tobacco. I rise today to speak on the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018, which delivers on the 2016-17 budget commitment to combat illicit tobacco and criminal activity which the Australian Taxation Office has identified as a major resource for organised crime. In talking about organised crime, I go back to my time at the organised crime squad in Victoria. Just prior to my arrival, there had been a major investigation into the selling of illicit tobacco. Back in those days, it was basically a 12-month operation. Victoria Police spent so much money on it but never had the legislative power to actually have a successful prosecution. So, at the state level over 15 years ago, law enforcement made the decision that it was not worth going after those involved in the movement of illicit tobacco, because the penalties simply weren't there. Why do people get involved in this? As the member for Hughes said, it's simply to save on tax or avoid paying tax.

On another inquiry I was on, the serious and organised crime inquiry, the committee visited a Customs office location in New South Wales. The Customs office had done a great service and seized pretty much a container load of counterfeit cigarettes. I asked, 'Do you let these run and pick up the guys involved?' They said, 'No; the AFP won't get involved and the Customs officers didn't want to get involved.' So, basically, they just forfeited the container. The organised crime groups were very much focused on the movement of illicit tobacco simply because, when it came to the courts, it wasn't viewed in the same terms as, say, trafficking heroin, and the money they made was quite incredible. They bring in a container load of cheap counterfeit cigarettes worth maybe $200,000 or $300,000, but, by the time they sell them on the black market, they make $3 million. The organised crime syndicates accept that maybe one of four containers would be seized by Customs but, even with the loss of $300,000, they can make in the vicinity of $10 million with the others containers.

The great news is that the Australian Border Force has, in the last two years, seized 400 tonnes of illegal tobacco and prosecuted 45 smugglers. I very much congratulate them on that. There is a focus on this because law enforcement realised that there's money to be made here by organised crime syndicates and that's the only reason they're involved. Yet, even though we've had this amazing success, organised crime syndicates are very much involved in this. Australia's current high tobacco costs are especially noticeable when compared to Asia, where cigarettes can retail for less than $2 a packet. I believe this poses a serious challenge to our law enforcement processes.

There are reports that the illicit tobacco market is increasingly linked to, and in some cases is even more profitable than, the narcotics trade—and this is true. I go back to a point I made before: if a container load of cigarettes comes in, the public view is that that poses a lot less danger than those who are trying to bring in, say, heroin or cocaine. The illegal trade involves a range of products, including loose-leaf tobacco, known as chop-chop, shisha tobacco, smoked in the Middle East, contraband in the form of stolen legally imported cigarettes, illegally imported foreign brands without Australian health warnings or any duty paid and counterfeit products with fake Australian packaging.

A report by KPMG revealed that 13.9 per cent of Australian total tobacco consumption, or 2.3 million kilos of tobacco, was estimated to be illicit. The same report found that the Australian government is losing $1.6 billion a year to the illegal tobacco industry. That money could be spent on hospitals and looking after the Australian people rather than going into the pockets of organised criminals. The former head of the government's illicit tobacco task force, and now-retired former Australian Federal Police officer, Rohan Pike estimates that the lost tax revenue figure is more like $4 billion.

We now have the situation where a huge range of brands and counterfeit imitations are being sold illegally by small grocery stores and individuals across the country. Recently, Jeff Rogut, from the Australasian Association of Convenience Stores, noted that criminals were taking advantage of cigarette legislation and said:

For too long, criminals have taken advantage of the gaps that exist around regulation of illegal tobacco, and have literally been driving trucks laden with contraband through those gaps. The trade is booming—and cigarettes have become the most valuable commodity for crime gangs. Our stores and our staff are victims of terrifying smash and grab robberies on a daily basis.

And we have seen that in Melbourne.

The bill will provide officers with access to tiered offences. By introducing tiered offences, prosecutors have more flexibility to bring charges against persons who have committed an illicit tobacco offence. The tiering of offences is based on the quantity of tobacco and is aimed directly at the commercial illicit tobacco market, rather than individuals buying small quantities for personal use. Strengthened penalties will provide a stronger disincentive for criminal behaviour. That is very true. Criminals realise that if legislation and penalties are weak they will go for the easy option, especially if it's going to give them great financial return. A person caught with five kilograms of illicit tobacco will now face a fine of up to $42,000. A person caught with 100 kilograms of illicit tobacco can face a penalty of up to $450,000 or five years imprisonment. I like the imprisonment, because obviously selling that amount they still make a fair whack of money from it. A person caught with 500 kilograms of illicit can face a penalty of over $2 million or 10 years in prison. So the penalties take into account the seriousness of the offence and provide a deterrent to illegal activities.

The bill also confirms that tobacco offences apply when the origin of the illicit tobacco cannot be established. From a law enforcement perspective, this addresses the current obstacle that where uncertainty arises it is very hard to know whether it is domestically grown or imported. It is a point of proof which prosecutions find very difficult to establish.

I also believe the bill will have further benefit in that it will improve the health of Australia. Smoking is one of the country's most preventable causes of death. There are an estimated 2.6 million smokers in Australia and the habit kills about 15,000 people every year. That's 15,000 reasons to reduce Australians' exposure to tobacco products. I was listening on the radio the other night where they had a cardiologist talking about the main way of preventing heart attack. He said, 'Give up smoking.'

This bill is clearly an important component of our government's suite of measures to discourage smoking. In the recent government submission to the tobacco inquiry, Cancer Council Australia referred to the high cost of tobacco as being 'the single most effective method available for reducing tobacco consumption, increasing attempts to quit and reducing smoking prevalence, thereby reducing death and disease caused by smoking.' If we look at this from the point of view of the cost to the taxpayer, more than $30 billion is estimated to be spent each year on health, social and economic costs related to smoking.

Illicit tobacco also creates a different picture around Australia's smoking rates. According to the most recent Australian Bureau of Statistics national health survey, adult smoking rates fell from 16.1 per cent in 2011-12 to 14.5 per cent in 2014-2015. The National Drug Strategy household survey shows a similar decline. But the Australian Criminal Intelligence Commission's annual national wastewater survey, in which households' waste is tested for the presence of various drugs, tells a different story. Law enforcement agencies consider it more reliable because it's hard to hide what's in your urine. The commission's report issued in July last year from testing conducted over a six month period shows tobacco use nationally going up, not down. So obviously we're talking about illegal tobacco now. That means there's no room for complacency and greater urgency to implement this bill as further measures to discourage smoking.

The amendments in this bill as a whole will ensure there is a comprehensive set of offences aimed at stopping the importation, possession, purchase, sale and production of illicit tobacco. In addition, the bill makes it an offence to possess equipment used in the production of illicit tobacco—again, a very important tool for law enforcement. Police may not actually come up with the illegal tobacco, but if they get the equipment they can then seize that and charge people.

These changes are supported by the Minister for Home Affairs, who is doing a fantastic job. He will later introduce legislation to amend the Customs Act to strengthen illicit tobacco offences, which will complement the amendments contained within this bill. I therefore commend this bill to the House.

Nicolle Flint (Boothby, Liberal Party) Share this | Link to this | Hansard source

I am speaking on the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018 today because I support reforms to the penalty and offence framework for illicit tobacco and our government's commitment to stopping the importation, possession, purchase, sale and production of illicit tobacco. This bill delivers on our 2016-17 budget commitment, and it will have a significant positive financial impact on revenue over the forward estimates.

The estimate just provided by my colleague the member for La Trobe, who gave an excellent speech on this issue—he is a former law enforcement officer himself, so he really understands the issues involved—of the impact on our budget bottom line was something in the order of $1.6 billion. So that's a very significant amount of money. Without the measures this bill introduces to stop the supply of illicit and illegal tobacco, the tobacco black market will continue to operate and potentially expand. Without this bill, the Australian Taxation Office and the Department of Home Affairs will continue to find it difficult to prosecute suppliers of illicit and illegal tobacco. The Black Economy Taskforce has recommended that measures be introduced to deal with this problem. Otherwise, people dealing in the trade will have an unfair advantage over businesses that legally sell tobacco, such as our supermarkets, service stations, corner stores and hotels.

When we have a large illicit tobacco trade, we are also far less able to ascertain how many people are smoking, in what amounts and at what rates in our community. When we don't know this, how can we help people to quit? How can we identify where to target assistance and resources and which factors to look at that might be encouraging people to smoke cigarettes?

I support this bill for all the reasons I have just mentioned but also because we need to stand up for businesses that are obeying the law and selling tobacco products according to the law. We need to ensure that we do not continue to allow the illegal sale of tobacco to threaten our small, medium and even larger businesses that are losing revenue and downsizing their workforces, sometimes because of this.

I am a member of the Standing Committee on Tax and Revenue. The committee recently heard evidence from a range of business organisations on this very issue. We heard from Master Grocers Australia. Master Grocers Australia represents more than 2,500 independent supermarket and liquor retailers of all sizes employing more than 115,000 hardworking Australians. These businesses have a turnover of around $14.8 billion, so they are obviously very important to our economy. The chief executive officer of Master Grocers Australia, Mr Jos de Bruin, told our committee:

… we have had great concerns about the illicit and illegal tobacco market. At first we did not think much of it or hear much about it but over a period of time we started to get a lot of feedback, as an industry organisation, from various states that it was becoming an issue and it was having an effect on the sales of tobacco in our member stores. Like it or not, it is a legal product. We spend a lot of money to comply. We spend a lot of money to train people to serve tobacco and so the rigor is just endless.

We have had some of our members quote figures of losing 20 to 25 per cent of their measured weekly sales, not knowing where those sales have been lost, only to discover that it seems to be illicit tobacco, tobacco that was found to be sold on Facebook or some other social media form that they discovered was affecting their sales.

The committee also heard alarming evidence about the rate of successful and attempted break-ins targeting tobacco products. The Australian Retailers Association estimated that their membership owned around 50,000 shopfronts and, of those shopfronts, around half stocked cigarettes and tobacco products. The Australian Retailers Association told the committee that, of the 25,000 or so shopfronts that stock tobacco products, almost all of them had had an attempted break-in. In fact, break-ins are now reported to be so common amongst businesses that stock tobacco they can no longer get insurance or are forced to hire security at their own cost. For a lot of small businesses obviously this just isn't an option. This tells us that something has gone quite wrong with the sale of tobacco in Australia. Thanks to the work of the Black Economy Taskforce and the Standing Committee on Tax and Revenue, and thanks to the evidence provided by the peak industry associations and bodies who represent our retailers and businesses, and thanks to the information provided to them by hardworking Australians who are the owners and the staff who own and work in these businesses—and a lot of these businesses are small and medium retailers; they're often family owned businesses—we know that customers and consumers are turning to the black market, where cigarettes are so much cheaper that normally law-abiding citizens are willing to take the risk to purchase tobacco illegally.

We know that there should be, and there must be, a tax on cigarettes and on tobacco. The tax is designed to address the very well documented negative health impacts of tobacco. We know that we, as a government, must do everything to support people who use tobacco products, who smoke cigarettes and who want to quit. We know this is important for their health and for the health of our health system. Unfortunately, however, with the tax on this product it seems we have reached a tipping point where the rise in illegal and illicit tobacco sales is the unintended consequence of taxing tobacco at a rate that is now too high. I understand that in Australia now approximately 70 per cent of the cost of a packet of cigarettes is made up of tax. According to the Australian Taxation Office, cigarettes are subject to the twice-yearly excise increases on tobacco products. The increase is applied in March and September and is based on average weekly ordinary-time earnings. In addition, excise rates for tobacco will increase by 12½ per cent on 1 September this year and for a further two years until September 2020.

While this bill does obviously address the illicit and illegal tobacco market, we must also have a very careful look at the cause of this market. The current tax regime on tobacco products is not only making our campaign to address the very real health concerns and impacts less effective than it could be; it's hurting law-abiding Australian businesses and increasing costs that are ultimately borne by consumers. Mr de Bruin, the CEO of Masters Grocers, told the tax and revenue committee:

We have an issue in regards to the fact that we are losing sales, and sales are what keep our doors open. It is a very low-margin items for us. It is high turnover and low margin. Grocery is a razor thin margin so to lose any percentage of sale on any product will affect our profitability and our ability to employ and to be sustainable.

It's not just businesses that are suffering; it's also government. When people buy illegal or illicit tobacco, the federal government loses tax revenue, and, as I outlined earlier, the tax revenue that we are losing is significant. I believe that we all accept that tobacco products should be taxed and that this tax revenue helps to fund general revenue for spending on services, some of which include specific services related to tobacco and tobacco products, such as education and prevention campaigns. It also funds our health system for tobacco related health treatments. We are losing out on a very significant amount of tax revenue because we have reached the stage, as I said earlier, where the level of tax on tobacco has reached a tipping point. We've reached the point where a large illicit and illegal tobacco market has been the unintended consequence of the level of taxation applied in this area.

In closing, I would like to congratulate the minister on this bill. I support reforms to the penalty and offence framework for illicit tobacco and our government's commitment to stopping the importation, possession, purchase, sale and production of illicit tobacco. This bill delivers on our budget commitments and will have a significant positive financial impact on revenue over the forwards estimates. Without the measures this bill introduces to stem the supply of illicit and illegal tobacco, the tobacco black market will continue to operate and potentially expand. We do not want this outcome. We want to know how many people are using tobacco so we can do everything that we, as a government, can to support people who want to quit. This bill will improve the health of Australians by reducing their exposure to tobacco products. It also helps to ensure that tobacco products consumed domestically are fully taxed and comply with Australian regulations. This bill is important for the health of Australians and for the health of our health system.

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

I start off by saying that, as a reformed smoker of nearly 30 years, I have a keen interest in this area. I gave up back in 2004. I look back at how addictive tobacco is. Doctors, clinicians and people tell me that tobacco is one of the most addictive drugs available to mankind. We know that tobacco causes illness, death, amputations and a whole range of things, yet the tobacco companies still spruik to try to sell to the public. They use every marketing trick in the book to attract new smokers to this dreadful drug, which has killed so many people over the years in this world. We know some of the tactics and tricks they do use. For example, because of the advertising cut down and the push to ban tobacco not just here in Australia but around the world, they continually get high-profile movie stars to pull out and show a packet of cigarettes and light up in movies. In the early 1990s Sylvester Stallone was paid $50,000 just to pull out and show a packet of cigarettes in a movie. I will not name the brand, because I will never allow myself to name a tobacco product and give them a profile, but these are some of the tactics they use.

I was very proud to be the chair of the Standing Committee on Health and Ageing back in the 2010-13 parliament. I chaired the plain-packaging tobacco inquiry. During that inquiry we saw some of the tactics that are used on packaging. For example, some of the slimline cigarettes were obviously marketed to attract young females. Cigarettes in tins and other marketing products were to attract young males. We know that inhaling tobacco is a dying art either way—you will die from it one day or you will give up—so they are always looking at new tactics and how to get across to our youth especially.

Even though we are supporting the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018—I think it's a good way to go, and I have heard the arguments on both sides—one point we want to make clear in this debate is the coalition's continued acceptance of donations from big tobacco. It's an absolute disgrace that they are accepting money from a tobacco company. Members of parliament have to set the standard. These companies produce a drug that addicts people and will kill them in the long run if they continue smoking it. I sometimes ask friends of mine and others who still smoke: 'Who do you see smoking? Do you see anyone over 70?' It is very rare that you do because they have passed away at an early age because of the addiction to tobacco.

We need to make sure that we don't accept from tobacco companies money that is given for public elections. It's really sad and unfortunate that the coalition continues to accept donations from the big tobacco companies. As I said, that is a disgrace. As members of parliament we should be setting the standard. After I had chaired the plain-packaging report, I've got to say that I went hard on the tobacco companies in all of my media interviews and everything I did because I had been a victim of the tobacco companies. Over the years I've developed very slight asthma from smoking. It's my own fault, but I don't want to see that harm being done to other people. During the 2013 campaign a whole range of money was donated. In 2012-13 Philip Morris donated in total $107,000 to the Liberal and National parties. The donations included $45,000 to the Liberal Party's federal branch, $25,000 to the National Party's federal arm and $6,100 to the Liberal Party division in the seat of Hindmarsh, to my opponent. I wonder why they did that. They didn't donate to any other seats; just to the seat of Hindmarsh. Maybe it had something to do with me making statements, claims and speeches in this place and the very antitobacco views that I have. Maybe that was it. This just shows you how the big tobacco companies operate. I think the plain packaging legislation that was brought in was a great measure. It was a great measure in terms of ensuring that our young people, who the packaging was marketed at, wouldn't take up smoking. I seek leave to table the media report about Philip Morris tossing $100,000 into the coalition coffers, which was printed on 4 February 2014.

The DEPUTY SPEAKER (Mr Goodenough):   Is leave granted?

Leave not granted.

Mr GEORGANAS:   That would be right. Leave wouldn't be granted, because you wouldn't want the Australian public to see, individually, where they donated money and how much money was donated. It's about time the coalition—the Liberal Party and The Nationals—stop ped putting money into their war chest from tobacco companies. This is an area that must be stopped as soon as possible. I would like to see the Prime Minister come out with a statement saying that he will ban all his party members and his political party arms from accepting donations from tobacco companies.

Melissa Price (Durack, Liberal Party, Assistant Minister for the Environment) Share this | Link to this | Hansard source

Firstly, I would like to thank those members who have contributed to this debate and acknowledge my Western Australian colleague the member for Perth for an excellent speech.

This bill tackles illicit tobacco. It reforms the penalty and offence framework in the Excise Act 1901 to provide enforcement officers with access to tiered offences and strengthened penalties for offences related to illicit tobacco. These measures deliver on the government's 2016-17 budget commitment to better combat the illicit tobacco market and improve the health of Australians by reducing smoking rates. Full details of the measure is contained in the explanatory memorandum, and I commend this bill to the House.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Fenner has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.