Budget crackdown on illicit tobacco aims to raise $3.6bn over four years

The Turnbull government will aim to raise $3.6bn over four years through a crackdown on illicit tobacco to be announced in Tuesday’s budget.

On Sunday, the finance minister, Mathias Cormann, confirmed the plan to prevent the sale of 864 tonnes of illicit tobacco that escapes duties each year.

The Australian Taxation Office will be given expanded powers to charge excise and other taxes when tobacco enters the country rather than when products such as cigarettes leave a licensed warehouse in Australia destined for the retail market. The policy includes a new requirement to obtain a permit to import tobacco.

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The government will establish a tobacco taskforce, to be led by the Australian Border Force, to dismantle illicit tobacco supply chains.

On Sky News, Cormann confirmed the $3.6bn revenue figure, explaining it was based on advice the ATO could raise the sum if given additional resources.

“The minister for revenue, Kelly O’Dwyer, is putting together a taskforce that will better coordinate efforts across all relevant agencies,” Cormann said.

Tobacco escapes taxation either by undetected importation into Australia, being grown illegally or through theft from warehouses after legal importation.

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Cormann said the evidence was that the illegal sale of tobacco had “been an increasing problem that needs addressing and that’s what we’re doing”.

In the 2016 budget, the Turnbull government raised the tobacco excise by 12.5%.

Asked if this had contributed to the problem, Cormann replied that “there is always an element in the community that will seek to avoid paying their fair share of tax”.

“We’re always looking for ways to protect the revenue, we’re always looking for ways ... to ensure revenue is paid as it must under our laws,” he said.

The government says it has seized an estimated 98 tonnes of illicit tobacco this financial year alone, which would have netted almost $90m in revenue had it been sold legally.