THERE'S renewed interest in black market tobacco in Malaysia, which the New Straits Times has highlighted with its excellent Insights event.
We have similar issues in Australia and the blame can be placed squarely at the feet of the Australian government, which no country should try to emulate in addressing illicit tobacco.
A Malaysian woman was recently sentenced to two years in an Australian jail for orchestrating a sophisticated money-laundering and tobacco smuggling operation on behalf of a large-scale global crime syndicate.
Federal police telephone intercepts overheard her telling one of her underlings that the cigarette imports were "only about the dodging of tax, so Customs should not be interested".
Most countries impose taxes on tobacco, for which two justifications are offered. One, not heard very often, is that it can raise a lot of revenue. The other, mentioned frequently, is that it discourages smoking. The first is the truth; the second may once have been true in Australia, but it is not now.
Rates of smoking are not falling. Australia's big increases in tobacco excise began in 1992. However, it really took off in 2010 with a 25 per cent increase followed by increases of 12.5 per cent every year from 2013, with the latest in September this year.
Last year, the excise rate was about 270 per cent higher than in 2012. As a consequence, cigarettes in Australia are the most expensive in the world at about A$1.20 per stick (depending on brand) at retail level. Tobacco excise contributes almost A$18 billion a year to government revenue.
With the price of an entire pack costing less than this in some countries, there is an enormous incentive to smuggle tobacco products into Australia. It is said that even if nine out of 10 containers of illicit tobacco products are intercepted, the profits on the 10th are sufficient to cover the losses and reward the smugglers handsomely.
Smokers, a large proportion of whom are on low incomes, have responded appropriately. The annual survey of tobacco consumption undertaken by KPMG found that illicit tobacco increased from 14 per cent of the market in 2018 to more than 20 per cent last year.
A total of 3.1 million kg of tobacco, loose and packaged, were smuggled into the country, avoiding A$3.41 billion in excise. This occurred despite a 46 per cent increase in tobacco seizures by the Australian Border Force.
It seems the Covid-19 pandemic has provided an enormous boon for smugglers and criminal syndicates as law enforcement officials are increasingly focused on patrolling internal or state borders.
To some extent, this is of no great concern to anyone except the federal government. Cheap smokes are no more dangerous than the legal kind and the smugglers are merely evading taxes, not something most of us would seriously criticise.
The problem is, the people smuggling tobacco are usually smuggling other things, too. Profits from tobacco smuggling are funding these other activities, particularly drugs and human trafficking.
The response of Australia's federal government has been to boost deterrence and interdiction efforts. Penalties have been increased and, in 2018, it established an Illicit Tobacco Taskforce to "proactively detect, disrupt and dismantle serious organised crime syndicates that deal in illicit tobacco". The result is increased seizures but, as the KPMG survey shows, it is yet to make any difference to the market.
The obvious solution would be to remove the incentive to smuggle tobacco by reducing the excise. Smokers would buy their favourite legal brands if they were cheaper, legitimate tobacco retailers would not be competing against illicit suppliers, and less money would be spent on law enforcement.
Malaysia, like Australia, needs to take a stand against the illegal trade in tobacco and other forms of contraband, but it should learn from history and see where other countries have failed.
Regrettably, learning from history is not something that governments are good at, even when smuggling has such a long history. On tobacco, Australia never learns.
The writer is a former senator in the Australian Senate
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times