AUSTRALIA : Governments worldwide impose strict regulations and high taxes on tobacco and vaping products to reduce smoking rates and protect public health. However, excessive restrictions can have unintended consequences, including the rise of black markets, increased crime, and declining government revenue. Australia approach serves as a cautionary tale,
demonstrating how overregulation can backfire and create more problems than it solves. Australia has some of the most prohibitive tobacco and vaping policies in the developed world. With some of the highest tobacco taxes globally and a prescription-only model for vaping, these measures were designed to discourage smoking. However, the results tell a different story. Tobacco excise revenue has plummeted from a record $16.3 billion in 2019-20 to just $9.7 billion last year. Projections indicate further decline, with revenue expected to drop to $8.8 billion in 2024-25, amounting to an estimated $10.7 billion loss over four years. Rather than reducing smoking rates, these aggressive policies have fueled a thriving illicit market. Criminal networks now dominate the supply of smuggled cigarettes and unregulated vapes, undermining public health and law enforcement efforts. An estimated 20-25% of all tobacco consumed in Australia is illicit, depriving the government of billions in tax revenue. Meanwhile, 92% of vapers source products illegally, highlighting the failure of strict prescription-based vaping laws.
With a 25-pack of cigarettes costing about $50, of which $34 is tax, demand for cheaper alternatives has surged. This has led to an alarming increase in smuggling operations, border corruption, and violent turf wars among criminal groups. The black market continues to flourish despite law enforcement efforts, with illegal tobacco and vape imports flooding the country. Organized crime groups profit massively while consumers are exposed to unregulated products, increasing public health risks.
Experts acknowledge that their seizures of illicit tobacco and vapes barely impact the underground economy. Meanwhile, economic realities push lower-income smokers toward illicit alternatives, as the high cost of legal cigarettes becomes increasingly unaffordable. In a consultation launched in 2022, Therapeutic Goods Administration (TGA) admitted, "it is apparent that the regulations are not achieving their intended purpose. It is clear that a black market of (Nicotine Vaping Products) NVPs exists, and that NVPs are being readily accessed unlawfully by children and adolescents, and by adults for 'recreational' purposes (i.e. not for smoking cessation), without a prescription."
Rather than persisting with failing policies, policymakers must recognize the unintended consequences of excessive taxation and overregulation. Further excise increases will not significantly reduce smoking rates but will push more consumers toward the black market, strengthening criminal networks and increasing enforcement costs. A more effective strategy would involve shifting toward a regulated market for vaping. Allowing adult consumers access to safer alternatives through licensed retailers with strict age restrictions would offer smokers a legitimate pathway to quitting. This approach would help dismantle the illicit trade, generate billions in tax revenue, and fund public health initiatives more effectively.
Australia’s experience highlights the dangers of excessive regulation and prohibition. Instead of curbing smoking and vaping rates, stringent policies have fueled an expansive black market, leading to increased crime, lost tax revenue, and greater public health risks. The government must reconsider its approach, balancing regulation with accessibility to safer alternatives. By embracing a controlled legal market for vaping, policymakers can reduce illicit trade, protect consumers, and restore lost revenue for critical public health programs.
To address this crisis, a fundamental policy shift is necessary. A more balanced approach, one that allows regulated access to safer alternatives while maintaining appropriate restrictions, would help dismantle the black market and redirect billions in lost revenue to meaningful public health initiatives. Past prohibitions, from alcohol to narcotics, show that outright bans and extreme taxation rarely eliminate demand but instead push markets underground, making products more dangerous and law enforcement costs unsustainable. Without meaningful reform, Australia risks further entrenching organized crime and exposing consumers, particularly young people, to unsafe, unregulated products. Policymakers must recognize that the path forward lies in smarter, evidence-based regulation that balances maintaining public health with market control.
