Coalition defends tobacco tax cut plan, rejects claims it will boost smoking rates

Opposition Leader Angus Taylor says slashing excise by 80% targets illegal tobacco trade, not public health

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By LineZotpaper

Published6 September 2026

Read Time3 min

Opposition Leader Angus Taylor has defended the Coalition's proposal to cut the tobacco excise by 80 per cent – reducing the tax on a pack of cigarettes by more than $20 – insisting it will not create more smokers, as the cost of illegal cigarettes already matches the lower price point.

The Coalition has not modelled how its proposed 80 per cent cut to the tobacco excise would affect smoking rates, Shadow Home Affairs Minister Jonno Duniam told ABC's Insiders program, though it has examined the consequences of similar approaches overseas.

Senator Duniam pointed to Canada, which raised tobacco taxes through the 1980s and 1990s to discourage smoking, but after an explosion in organised crime, Canadian federal and provincial governments slashed tobacco taxes in 1994. The cuts led to a spike in smoking, particularly among young people, he said, however smoking rates in Canada have ultimately fallen.

"There was a point in time they went up, but over the course of time — as the illicit tobacco trade trailed off — smoking rates went down to where they are now, which is 11 per cent," Senator Duniam said. "And their policy settings continued that trajectory over that course of time."

Canada's federal and provincial governments eventually restored pre-1994 tax rates on tobacco, which supporters say allowed a gradual return after the black market had been crushed and law enforcement established. Critics, however, say it failed to provide a permanent fix, with the illicit black market returning, higher youth smoking rates in the meantime, and lost revenue from the tax cut.

The tobacco commissioner has estimated about half of all tobacco sales in Australia are now through the black market — fuelling billions in proceeds for crime groups, leading to increased violence particularly in Sydney and Melbourne, and eating into federal government revenue from the tax on tobacco.

Senator Duniam said modelling by the Parliamentary Budget Office his party commissioned on how deeply to cut the tobacco excise found a "real change" in consumer behaviour if the excise was cut by 80 per cent. He said combined with law enforcement and education, Australia's illicit tobacco trade could be stamped out.

"We should also focus on disrupting the capacity for the illicit market to provide these products. That also causes issues for their capacity to supply, impacts their capacity to offer cheaper prices and the combined package altogether, not just the cut in excise, is what we believe will cripple the illicit tobacco market," Senator Duniam said.

"We want to see the smoking rates in this country go down. In order to do that, a part of the problem is dealing with cheap smokes out there in the community now. Kick off the illegal trade is the only way you can do that."

Earlier, Mr Taylor told News24 that to smash organised crime, legal cigarettes needed to be brought to "parity" with illegal tobacco.

Analysis

Why This Matters

The proposal represents a radical shift in Australia's long-standing approach of high tobacco taxes to discourage smoking, potentially affecting public health outcomes and government revenue.
The illegal tobacco trade is estimated to account for half of all tobacco sales, fueling organised crime violence in major cities – a problem that has escalated significantly in recent years.
The policy debate highlights a tension between public health goals and law enforcement approaches to tackling the black market.

Background

Australia has one of the highest tobacco tax regimes in the world, with regular annual excise increases designed to discourage smoking. The current high prices have contributed to a thriving black market, as illegal cigarettes are sold for significantly less than legal ones. The tobacco commissioner recently estimated that half of all tobacco sales in Australia now occur through the black market, generating billions for organised crime and contributing to violence, particularly in Sydney and Melbourne.

Key Perspectives

Coalition (Opposition): Argues that cutting the excise by 80% will bring legal cigarette prices down to match the illegal market, thereby starving organised crime of revenue and reducing violence. Combined with law enforcement and education, they say this approach will ultimately lower smoking rates by eliminating the cheap, unregulated black market.

Critics (public health advocates, likely government): Warn that the tax cut will lead to a spike in smoking rates, particularly among young people, by making cigarettes more affordable. They point to Canada's experience where smoking temporarily increased after the 1994 tax cuts, and argue the lost revenue could harm other health programs.

Illicit tobacco trade observers: Note that Canada eventually restored its taxes after the black market was suppressed, but critics say the fix was not permanent, with the black market later returning.

What to Watch

The Parliamentary Budget Office's modelling on consumer behaviour at the proposed 80% cut level.
Whether the Coalition provides further detail on the law enforcement and education components of its plan.
The federal government's response and whether it proposes alternative measures to tackle the illegal tobacco trade.
Any independent health impact assessments of the proposed excise cut.

Sources

Cutting cigarette tax will not create more smokers, Angus Taylor says — Just In