The Government’s 68% excise rip on a packet of cigarettes has cruelled revenue and showered millions on tobacco pirates. Adam Shand reports on the Budget and thriving illicit trade.
A major beneficiary of the Federal Budget is in an Iraqi jail, earning billions from illegal tobacco. Meanwhile, Kaz Hamad’s minions are free to burn Melbourne to the ground to enforce his will over retailers and more recently the hospitality industry.
Not since Prohibition in the United States has a government been so instrumental in building the criminal underworld than Labor’s disastrous policy of cutting smoking rates by jacking up excise.
Budget business as usual
Although the Budget papers show a $1.2 billion downgrade for 2025–26 against the previous year’s forecast they don’t show the $8 billion written off since estimates in 2022, already struck on falling projections.
And it’s business as usual for the crooks after Federal treasurer Jim Chalmers failed to cut excise in the budget.
The Iraqi-born Kaz Hamad, otherwise known as Australia’s unofficial health minister, made the decision of a lifetime when he gave up the heroin trade in favour of peddling nicotine to hapless smokers bearing the tax burden of their deadly habit.
Skyrocketing excise now makes up $34 of a packet retailing for $50.
When Hamad’s illicit tobacco option sells for just $15 a pack, the choice for consumers is easy.
Smoking drops – but not due to price rises
Being arrested in Iraq in January this year has done little to break Hamad’s grip over illicit tobacco which is estimated to make up 60 per cent of total sales in Australia.
With no policy change in sight, it’s expected illegal sales will make up 100 per cent of the market within 10 years. Smoking rates have dropped from 20 per cent in 2001 to less than 10 per cent but that owes more to the fact that smoking kills, rather than the impact on demand from price increases.
Even as a revenue raiser, tobacco excise has underwhelmed.
According to the Budget, tobacco excise revenue will plunge to about $3.56 billion in 2026–27, from an anticipated $4.1 billion in 2025–26, as the booming illicit market undermines legal sales.
This is an $11 billion hit to revenue compared to projections made by the government in 2022. At least, Treasurer Jim Chalmers did tacitly recognise the impact of his excise policy. He allocated $14 million to assist state law enforcement with disrupting illicit tobacco and e-cigarette markets.
This is like applying a band-aid to an amputation.
As Prohibition did for Al Capone, tobacco excise has transformed a local gang into a powerful transnational syndicate and provided an incentive for Hamad to consolidate the market with a campaign of violence and arson.
Those retailers who did not pay the “Kaz tax” of up $5000 per month to operate in given territories and only stock certain brands were threatened with fire-bombings and violence.
Synagogue firebombing
The hegemony of Hamad’s organisation “The Cartel” was only interrupted by a misjudgement by its leader. In December 2024, Hamad took on a contract from, allegedly, Iran’s Revolutionary Guard to firebomb a synagogue in Melbourne.
This angered Iraqi authorities who had tolerated Hamad’s presence in the country, and gave the Australian Federal Police a chance to collaborate in his capture in January this year. Hamad is being held in a secret location awaiting trial for alleged drug trafficking.
There are no plans to extradite Hamad back to Australia, especially as he was able to build his tobacco empire from inside Barwon Jail in Victoria while serving a sentence for heroin trafficking.
Cartel rivals
With Hamad incommunicado, the illicit market has fallen into disequilibrium as others sense an opportunity to take over from The Cartel, setting off a new wave of arsons and violent attacks. The offenders are often teenagers, recruited on Airtasker-style apps and being paid as little as $500.
The campaign has spread to bars, restaurants and hospitality venues. Melbourne, once touted as the world’s most liveable city, has become its most flammable as the attacks are happening almost nightly. It’s understood the crooks see an opportunity to force venue owners to stock bootleg alcohol and extort cash as Hamad has done with tobacco and vapes.
Victoria Police fight losing battle
Victoria Police have been forced to initiate patrols of entertainment districts to capture the would-be arsonists but privately senior officers concede they are fighting a losing battle.
And the $14 million in the budget for disrupting the illegal tobacco trade is just a drop in the bucket. The injury is inflicted at the federal level through excise and the states are being asked to be the ambulance.
For consumers, there is no penalty or stigma to buying illegal smokes
and Hamad’s Manchester brand has become the nation’s most popular. Nothing will change until the Federal Government accepts the folly of its excise regime.
Al Capone’s popularity during his heyday demonstrates the challenge facing law enforcement.
“It’s bootleg when it’s on the trucks, but whenever your host hands it to you on a silver tray, it’s hospitality,” said Capone.
“The country wanted booze and I organized it”.
Capone’s philosophy on dealing with rivals is playing out once more on the streets of Melbourne.
“You can go a long way with a smile. You can go a lot farther with a smile and a gun.”
Illegal tobacco trade kingpin arrested. Long live king tobacco
Adam Shand is a journalist with twenty-five years experience in television, print and online media. Since 1997 he has been an investigative reporter and author. His books include Big Shots: The Chilling Inside Story of Carl Williams and the Gangland Wars (2007) and the forthcoming Kangaroo Gang.