Mr ENTSCH (Leichhardt-Chief Opposition Whip) (11:10): As the member for Leichhardt, I have taken a very keen interest in measures to control illegal tobacco. I actually grew up in Mareeba, which was one of the largest tobacco-producing regions in Australia. In fact, one of my first jobs was working on tobacco farms, suckering tobacco, at about the age of 12, so I have a reasonable understanding of the legitimate industry and how it functions.
I welcome the opportunity today to support the Customs Amendment (Smuggled Tobacco) Bill 2012. It gives me the opportunity to highlight the concerns raised particularly by tourism stakeholders and others, such as the Australian Airports Association, the Tourism and Transport Forum and the Australian Duty Free Association, about this government’s slapdash approach to policy. Of course, tourism is very much the lifeblood of the area that I represent-about 40 per cent of our economy-so we need to be very conscious of any negative impacts that we are likely to have on that industry.
In reading this bill, we must look at it in the context of the recent cuts to the duty-free tobacco allowances, which mean that people arriving at Cairns airport can now bring in two packets per passenger-this is down from in the past, hen it was a carton-as well as successive cuts to the budget of the Customs and Border Protection Service. Both of these make Cairns, and Australia, much more susceptible to quarantine risk and less able to give tourists a good first impression as they are waiting to be processed; by taking what they see as their duty-free allowance and removing it from them or opening the carton and handing them back just two packets of cigarettes. Of course, they do not get any reimbursement for the money they have spent on the whole carton.
The purpose of this bill is to amend the Customs Act 1901 to create criminal offences for the smuggling of tobacco products and for the conveyance or possession of smuggled tobacco products where the person conveying or possessing the goods knows that they were smuggled. Although a smuggling offence already exists under the act which is punishable by a fine of up to five times the duty that was dodged, this is no longer considered to seriously deter smugglers, as many of the fines imposed just do not get paid. On rare occasions, if enough evidence is found to warrant fraud charges being laid under the Criminal Code Act 1995, smugglers can face up to 10 years imprisonment.
These new criminal offences will combine the penalties of the existing smuggling and fraud offences. This means that people who knowingly smuggle tobacco products will face not only the existing fine but also up to 10 years imprisonment. This will certainly provide a strong deterrent to criminals and illustrate the seriousness of these smuggling acts. In the 2009-10 budget, Labor cut funding for the Customs cargo screening program by $58.1 million. The result of these cuts is that the number of sea cargo inspections was cut by 25 per cent and air cargo inspections were reduced by 75 per cent.
With less cargo being screened, there is a greater opportunity for illicit tobacco to be smuggled through our borders. Just this year, an industry-commissioned report into the illicit trade of tobacco in Australia confirmed that illegal tobacco is a real and significant threat. It found that in 2011 our illicit market totalled around 2.26 million kilograms of tobacco, which is equivalent to 13.4 per cent of the estimated legal tobacco market. Illegal tobacco takes many forms: there is duty-free diverted product; there is the counterfeit product, normally originating in China; there are unbranded tailor-made cigarettes; and loose-leaf, or what we commonly know as chop-chop, that has been grown illegally in Australia.
Tobacco is no longer grown legally in Australia. The Howard government was pleased to support efforts to close the legal growing market in Australia. They saw the buyout of many of the licences on farmers, and effectively paid out those licences in the northern area, in my area, and allowed them to diversify into other areas. A little later, the Victorian industry shut down as well. This was done to safeguard revenue and to reduce the toll from the more harmful and illegal chop-chop market. The illegal chop-chop market was only driven by a few rotten eggs in the tobacco-farming sector, those responsible for diverting products from legal channels. Farmers who shut down their crops were given two years profits by Australian manufacturers in return for cooperating with the authorities, and they were rightly given support as they worked to switch production into other crops.
I say this to highlight that, in its tobacco control reforms, the coalition acted with a great deal of engagement, planning and care to avoid unintended consequences; after all, the hallmark of creating good policy is that it is sensible, workable and evidence based. Our policy was driven by decision making at the Tobacco Industry Forum, which was established by the coalition and is made up of groups that have a keen interest in the tobacco industry. These included the Australian Taxation Office, the Customs and Border Protection Service, the Department of Health and Ageing and the Australian Quarantine and Inspection Service. Its purpose was to provide a forum for consultation and discussion on issues of mutual concern. By taking a planned approach, we made sure that we were not subject to the embarrassment that typifies this government’s knee-jerk policy forays and flights of fantasy. By introducing measures such as the graphic health warnings on cigarettes, the Howard government achieved the lowest rates of smoking in the Western world.
We are yet to measure the impacts of this government’s plain packaging legislation that will see consumers downgrade to cheap unbranded cigarettes, but it is likely that this will see increased consumption of tobacco in the absence of minimum retail price for that tobacco. This legislation will also make detection of illegal tobacco more difficult. Brand colouring, embossing and other distinguishing features being replaced by a standard form of packaging is going to make counterfeiters’ work much, much easier.
At the same time, government is encouraging smuggling by taking the cops off the beat at airports, while restricting importation via duty-free stores. I have a media release from the Australian Duty Free Association issued after the May budget, when duty-free reform was introduced without any consultation with the Australian Duty Free Association or other important travel or tourism stakeholders. In her 8 May media release, the minister was gloating that this reform:
“… reduces the number of tax free cigarettes that can be brought into the country and brings duty free tobacco into line with the Government’s tough stand on reducing tobacco consumption …”
Yet, after buying into the issue and posturing over her tough stand, the minister has now run away from this issue-since it has become obvious that it was conceived without proper planning. This is the standard that was set by the previous Prime Minister-it was a reason he was removed from the front bench-yet the standard has been retained and if anything it has grown worse under this current government.
When ADFA wrote to the health minister, the member for Sydney, she did not bother to engage with them, describing them in a leaked handwritten note as ‘minor stakeholders’. This is the peak body for the duty-free stores throughout Australia and certainly not a group that could be trivialised as a minor stakeholder that can or should be ignored. In recent media releases the director of the Australian Duty Free Association, Derek Larsen, states that this measure will radically slash the allowances for duty-free tobacco, with serious implications in the duty-free sector, and it represents a black hole that is approximately 7.5 per cent of the total budget surplus. He also highlights that the government has overstated the available revenue from the measure by around $110 million in 2013 and increasing to $140 million per year thereafter. He adds:
“The total sales revenue generated from duty-free tobacco is far less than the amount that the government estimates it can raise by ending the duty-free concession. It wants to reap more tax revenue from the sector than is generated in total sales.”
Quite clearly this is absolutely impossible.
Importantly as it relates to this bill, Mr Larsen warns that Customs are likely to be heavily impacted by the move and Customs officers will have to dedicate more time to policing the quantities of cigarettes being imported. This will put extra strain on frontline Customs services, which are already working hard to process arriving passengers in a timely manner. As you can appreciate, Mr Deputy Speaker, it will also have a very negative impact on visitors’ experiences entering Australia, assuming they are doing the right thing and purchasing their duty-free products at the airport. This is on their arrival in many cases before they go through Customs, and they then find that the product that they have legitimately purchased is removed from them and they are given only two packs.
In my view it is also very much likely to lead to a very significant increase in the black market trade in tobacco. Now that the Australian tobacco industry is virtually shut down, the opportunities for illegal chop chop coming out of Australia have been significantly reduced and this is highly unlikely. But what we are going to see is much more illegal product being imported in larger quantities. We have seen that in recent times, coming probably through our docks.
It is in desperation for a headline and reaching for a measure to prop up a fake surplus that this government is doing untold harm and denying a voice to its collateral victims. Duty-free sales constitute about one per cent of the tobacco industry sales, yet tobacco represents up to 30 per cent of duty-free sales. In its attempt to hurt the tobacco industry, it is instead damaging those who sell it legally. It is also encouraging the illicit trade.
In the absence of the health minister doing the job, the duty-free sector knocked on the door of Mr Ferguson, our minister for tourism. The duty-free sector informs me that that meeting lasted a total of seven minutes. This is a very clear message that if you are in tourism or tourism connected business and not with the resources and energy sector, the Minister for Resources, Energy and Tourism does not want to hear about your problems and is not available to assist in dealing with these serious issues for your sector. The minister for health, the minister for tourism or someone on the government side needs to come to the chamber in the course of this debate and answer some very serious questions as they impact on smuggling tobacco.
What is the progress on the reprinting of landing cards, at what cost, and why was the estimated cost of $10 million not included in the 2012 budget? What was the involvement of AQIS and what budget plans are in store to destroy the confiscated product? How will this product be treated and where was it purchased? Retail or abroad? What was the full price? What information program is planned for the tourism source markets and why has the government opted not to progress this policy idea without open lines of communication with the industry that has been so heavily impacted? What is the implication for increased waiting times additional to the impact of the Customs staff cuts, and when will these be reported to parliament? Now that crucial sentences will apply to tourists who hide extra cartons in their luggage, what assurance is there that this legislation will apply only to large-scale organised criminal gangs? Finally, when will the election be called? (Time expired)