The Coalition has pledged to reduce the tobacco excise by 80% if elected, aiming to eliminate the black market for tobacco products. Additionally, they intend to legalize, regulate, and impose taxes on vapes and nicotine pouches for adult consumers.
Meanwhile, One Nation has proposed a 75% reduction in the excise, while Labor has countered that there is insufficient evidence to support the notion that such significant cuts would effectively eradicate illicit trade.
If successful in the upcoming elections, a Coalition government would lower the excise on a standard pack of 20 cigarettes from approximately $30 to just $6, asserting that such a substantial price drop would dismantle the flourishing black market for tobacco products.
Recent statistics indicate that more than half of the tobacco consumed in Australia last year was purchased illegally, with the share of the illicit market rising to 80% when including vapes and nicotine pouches.
Public health officials have historically utilized tobacco excise as a means to deter smoking by increasing cigarette prices and have consistently cautioned against lowering the tax, as it could reverse progress made in reducing smoking rates.
The Coalition’s proposal also includes plans to regulate and tax vapes and nicotine pouches for adult users. Currently, individuals over 18 can acquire legal vapes through pharmacies, while nicotine pouches remain prohibited.
Under the Coalition’s framework, vapes would incur a modest excise of 50 cents per milliliter of e-liquid, with nicotine pouches taxed at 2.5 cents per milligram of nicotine.
A proposed $60 million three-year national public awareness campaign aims to highlight the organized crime elements involved in the illegal tobacco and vaping markets while educating the public about the risks associated with smoking.
Furthermore, an additional $200 million would be allocated for a nationwide law enforcement initiative designed to enhance raids, arrests, border seizures, and the shutdown of illegal tobacco outlets.
The rise in illegal tobacco sales has cost the federal budget tens of billions of dollars in excise revenue. The Coalition’s policy assumes that reducing legal cigarette prices would deter consumers from turning to illicit options.
Modeling conducted by the Parliamentary Budget Office (PBO) suggests that the Coalition’s proposed policy could generate an additional $8 billion in tax revenue over the first four years, effectively doubling current revenue projections.
One Nation has announced its intention to cut the excise by 75%, while Labor remains skeptical about the effectiveness of such drastic reductions in curbing the black market.
Opposition Leader Angus Taylor emphasized that the Coalition’s initiative targets the root of the black market by diminishing the profits of organized crime involved in the illegal tobacco and vape trade. He characterized the illicit trade as a form of economic terrorism affecting Australians and accused Labor of allowing this criminal enterprise to flourish.
Taylor noted that Australians are facing a dire situation with rising tobacco consumption, increased crime, and significant revenue losses. Reports indicate that tobacco use has surged by approximately 30% since late 2021, despite ongoing tax increases, highlighting the failures of the current government strategy.
However, data from the Australian Bureau of Statistics (ABS) indicates that while nicotine consumption has risen by about 30% over the past four years, this increase is attributed in part to the growing popularity of vapes and other nicotine products. The ABS has cautioned that these estimates are experimental and do not definitively link excise rates to overall tobacco consumption trends.
Shadow Health Minister Anne Ruston affirmed the Coalition’s commitment to reducing smoking and vaping rates, asserting that current Labor policies are ineffective in achieving this goal. Conversely, the latest National Drug Strategy Health Survey reported a decline in daily smoking rates among Australians aged 14 and older, from 8.3% in 2022-23 to a record low of 5.6% in 2025, with daily vaping rates remaining stable at 3.6%.
The price of a legal pack of 20 cigarettes ranges from $40 to $50, with the excise component accounting for as much as $30. In contrast, illicit cigarettes are sold for between $15 and $20. The Coalition claims that a significant reduction in excise would align the prices of legal and illegal cigarettes, thereby diminishing the allure of the black market.
It remains uncertain whether the PBO’s estimates assumed that black market prices would remain constant or decrease, allowing them to continue undercutting legal sales. Nationals Leader Matt Canavan argued that the current excise has created substantial profit margins for organized crime. He expressed that reducing the excise would redirect billions of dollars away from criminal enterprises, restore legality to the market, and empower law enforcement to combat remaining illegal activities.
The Coalition’s proposed excise reduction would undergo a review after two years to assess its impact and effectiveness.
