Cigarette prices in Australia are among the highest in the world due in large part to the eye-watering levy, and the massive price differential with illegal imports has driven growth in black market operators who stand to make huge profits as a result.
That's resulted in a steep decline in tax revenue for the federal government and a rise in arson attacks as rival syndicates fight for control over the lucrative market.
But now that those syndicates are entrenched, there is no evidence that lowering the excise would stamp out the illegal trade, illicit tobacco and e-cigarette commissioner Amber Shuhyta said.
Calls to cut the levy did not account for international evidence, which did not show a direct correlation between excise rates and black-market growth, and underestimated changes in criminal behaviour, she told a Senate hearing in Canberra.
"Illicit prices can also be reduced to remain competitive, and it's far from inconceivable that it could cause a resurgence in violence as they seek to preserve and protect their revenue," Ms Shuhyta said on Monday.
"There is no single lever that will fix this problem. It is complex, interconnected and constantly changing."
Australian Border Force has been intercepting record amounts of illegal cigarettes and vapes, with almost one thousand tonnes of tobacco and over four million vapes seized between December and April.
But the market has continued to grow regardless, as canny criminal groups adapt rapidly to evade enforcement, the ABF said.
ABF chief economist Justin Douglas said even halving the excise would still leave a sizeable price differential in favour of the black market.
"Illicit trade can always be cheaper. There is cheap, abundant supply. That means illicit traders can continue to reduce their price to maintain a price differential," he said.
"Until there is some evidence on the table that suggests different, my advice to government won't necessarily be focused on excise as a priority."
Australian Council on Smoking and Health chief executive Laura Hunter said a push to cut the excise was a "self-serving red herring" by the tobacco lobby.Â
Abundant supply through tobacconists was creating a feedback loop, incentivising demand, Ms Hunter said.
"If the legal market remains large widely accessible across 40,000 retailers and lightly regulated, it'll continue to sustain demand and provide cover for illicit supply," she said.
Treasurer Jim Chalmers told reporters he was sceptical that cutting the tobacco excise would result in the changes people were hoping for and the government was providing hundreds of millions of dollars extra to boost compliance instead.
To coincide with the hearing, health advocates placed 66 body bags on the lawns of Parliament House to represent the 66 Australians who die every day from tobacco.
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