Liberal Democrat senator David Leyonhjelm has denied his acceptance of donations from a tobacco company influenced his decision to push for a senate inquiry into illegal tobacco.

Senator Leyonhjelm is on the committee that will run the inquiry.

"No, the tobacco companies haven't asked me to do an inquiry, they have drawn to my attention the illicit tobacco market," Senator Leyonhjelm told 7.30.

"Obviously it's in their interest to be selling legal tobacco, not illegal tobacco."

Senator Leyonhjelm confirmed he has received $55,000 from Phillip Morris in the past, but claimed he had been campaigning for the right for people to smoke since 2001.

"Twelve years later we got a donation from a tobacco company, so if you try and draw a cause and effect between the two it's pretty tenuous," he said.

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Illegal tobacco is the latest enemy of the powerful tobacco industry, with industry-funded reports claiming it makes up 15 per cent of the Australian market.

"We see the illegal market as our fourth big competitor," said Scott McIntyre, from British American Tobacco.

"There's three legal companies in Australia - these guys are the fourth."

But Cancer Council Australia said the tobacco companies' focus on the illegal trade is a "scare campaign", trying to draw the attention away from government regulation of smoking.

Senator David Leyonhjelm says tobacco company donation didn't influence his push for a senate inquiry into illegal tobacco

"Illicit tobacco is a small problem in Australia," spokeswoman Kylie Lindorff said.

"There are very few smokers that use it and it's certainly not increasing.

"So, again government statistics show that the use of illicit tobacco is somewhere near 2 to 4 per cent of smokers using it, that's in stark contrast to the industry funded reports which say it's more around 15 per cent of the whole market."

The Australian Border Force is not downplaying the problem of illegal tobacco. It established a Tobacco Strike Force in October to tackle crime syndicates smuggling tobacco into the country.

Since then, the Strike Force has seized over seven tonnes of tobacco and 23 million cigarettes worth many millions of dollars, and representing millions of dollars of lost tax revenue.

"Most of the illicit tobacco comes from Asia and the Middle East," Acting Assistant Commissioner Anthony Seebach told 7.30.

According to the Bureau of Statistics, Australians spent $14.4 billion on tobacco products during 2015 but the number of people smoking has dramatically declined from 26 per cent of the population smoking to now 13 per cent.

The Senate inquiry into the impact of the tobacco black market, conducted by the Law Enforcement Committee, will hold its first hearing in Canberra on March 4.