Australia's high tobacco excise taxes have driven a surge in the illicit cigarette and vape trade, according to Rohan Pike.

This shift is significant because it suggests that public health pricing strategies may be inadvertently funding organized crime groups by creating a lucrative black market. As legal prices rise, the profit incentive for smuggling and unregulated sales increases.

Pike, the managing director of Rohan Pike Consulting, said that organized crime now controls approximately 80% [1] of the cigarette market. He spoke on Sky News Australia regarding the relationship between government taxation and the growth of the underground economy.

According to Pike, the high cost of legal tobacco makes illicit products more attractive to consumers. This price gap allows criminal networks to dominate the sector, as they can undercut legal retailers while maintaining high profit margins.

"Any reasonable person who’s taken a look at this problem and analysed it from top to bottom would come to the same conclusion that the excise has driven this problem and that it needs to be addressed," Pike said.

The illicit trade extends beyond traditional cigarettes to include the vape market. The lack of affordable legal options has pushed users toward unregulated sources, further expanding the reach of the syndicates involved in the distribution of these products.

Pike said the current tax structure creates a cycle where the government's attempt to reduce smoking through pricing actually empowers the criminal elements that manage the black market. He said the policy must be re-evaluated to address the root cause of the illicit trade.

“Organized crime now controls approximately 80% of the cigarette market.”

This situation highlights a tension between public health policy and national security. While excise taxes are designed to discourage smoking by increasing costs, the resulting market distortion can create an economic vacuum filled by organized crime. If the illicit market continues to grow, the government may face a dual challenge of declining tax revenue and an increase in criminal activity tied to the tobacco trade.