Just How Profitable Is Illicit Tobacco in Australia?

In the past 12 months, the southern Australian state of Victoria has been in the midst of what may be a ‘turf war’ between rival organised crime groups for the control of the sale of illicit tobacco products. While organised crime has been more traditionally associated with the distribution and sale of narcotic drugs, illegal gaming venues, prostitution services or human trafficking, recent events might suggest that distribution of untaxed tobacco is now another source of income for criminal gangs. This paper does not look to connect organised crime with illicit tobacco but rather looks at the extent of potential profits to be made from sourcing and distributing tobacco products on which the appropriate federal duties and taxes have not been paid, and whether this could be a possible ‘driver’ in attracting organised crime to the product. Using publicly available data, this paper will propose a methodology and use that methodology to gauge the potential profitability in relation to a container of imported illicit cigarettes.