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Thursday, 11 October 2012
Page: 7990


Senator BRANDIS (QueenslandDeputy Leader of the Opposition in the Senate) (12:52): The coalition supports this bill, the Customs Amendment (Smuggled Tobacco) Bill 2012, but I do want to remind the Senate that this debate takes place in the wake of the Gillard government's inconsistent and incompetent handling of this issue. While the Attorney-General is on a tobacco plain-packaging crusade and her government introduced a rushed budget measure to ban duty-free tobacco, the Attorney is unwilling to admit that illicit tobacco smuggling is a growing problem in Australia, notwithstanding this bill. She said in her second reading speech:

To date tobacco smuggling has not represented a major threat in Australia …

If there is no major threat, why then is it necessary to legislate? This is clearly an issue on which the government is in denial. The response is this measure that is made without any real conviction or action.

In the 2009-10 budget the Labor Party government cut funding for the Customs cargo screening program by $58.1 million. The result of those cuts is that the number of sea cargo inspections was cut by 25 per cent and air cargo inspections reduced by 75 per cent. With less cargo being screened there is, of course, a greater opportunity for illicit tobacco and other contraband to be smuggled across our borders.

An industry commissioned report by Deloitte in 2012, Illicit trade of tobacco in Australia, confirmed that illegal tobacco remains a significant problem. The report found that the illicit market in Australia for 2011 had an estimated total of 2.26 million kilograms of tobacco, equivalent to 13.4 per cent of the estimated legal tobacco market. It was estimated that this represents forgone tobacco excise revenue of approximately $1 billion, based on current excise rates. While figures on the illegal tobacco market will vary as it is impossible to know exactly what is smuggled through our borders, it provides an indication of the magnitude of the problem we are now facing.

Turning to the bill, its purpose 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 they were smuggled. A smuggling offence currently exists in section 233 of the act and is punishable by a pecuniary penalty of up to five times the duty evaded. However, that offence is no longer considered a sufficient deterrent as many penalties currently imposed for tobacco smuggling are not paid. On some occasions the investigation of the smuggling offence results in the identification of sufficient evidence to warrant the pursuit of fraud offences under the Criminal Code. These offences carry penalties of up to 10 years imprisonment.

The new offences to be introduced by this bill combine the penalties of the existing smuggling and fraud offences by providing a pecuniary penalty of up to five times the duty evaded in addition to a penalty of up to 10 years imprisonment. The intention of including provisions for imprisonment is to provide a strong deterrent against smuggling. The maximum term of 10 years imprisonment and penalty units already exist under general smuggling and fraud provisions under the Criminal Code. However, the new offences under the Customs Act will presumably simplify the prosecution process, something which the coalition of course supports.

However, the government does need to answer why this measure has been introduced without any increases in resources for Customs to screen and inspect incoming cargo to stop the illegal tobacco from coming through our borders. In other words, it is all very well to tighten the criminal law and elevate the penalties, but if the agency is at the same time being stripped of resources, as Customs has been throughout the course of this Labor government, then that is not a very effective way to achieve the outcome sought by the bill. The government, indeed, seems intent on making it harder for Customs officers to detect this contraband trade.

Despite the Attorney-General refusing to acknowledge that illicit tobacco smuggling is a big problem, the statistics speak for themselves. I have already referred to some; let me give you some more. During 2010-11, Customs made 55 detections in sea cargo arriving in Australia. They detected 258 tonnes of tobacco and 82 million cigarettes with a net worth of approximately $135 million. This is just a small indication of the problem, considering that many more cargo consignments go unchecked, with large quantities of smuggled tobacco coming across our borders as a result of the government's decision to cut back on the number of inspections.

The Senate Legal and Constitutional Affairs Committee held an inquiry into the bill and recommended that it be passed. I want to draw attention in particular to the submission of the Australian National Preventative Health Agency, which stated:

Smuggling and illicit trade of tobacco undermines the effectiveness of tax increases and price policies: resulting in cheaper prices and potential increases in tobacco use.

This in turn has the potential to contribute to the high incidence of smoking related morbidity and mortality.

According to the agency, the use of illicit loose tobacco has also been associated with illness over and above that caused by commercially produced cigarettes due to the use of bulking agents such as twigs, raw cotton and grass clippings. Mould, mycotoxins and bacteria have also been detected in illicit loose tobacco. Given the Attorney-General's current crusade against smoking, why hasn't there been a big push to educate people about the dangers of illegal tobacco?

In its submission Customs informed the committee that tobacco smuggling is identified as a key border risk. According to Customs, the smuggling of tobacco endangers the community and the environment as the tobacco products commonly contain dangerous contaminants and much higher levels of carcinogens than legitimate products. Customs pointed out that smuggled tobacco products also circumvent quarantine controls, thereby increasing the potential for exotic pests and diseases to be introduced through our borders. Customs advise that tobacco-smuggling offences are often committed by organised crime syndicates, who view tobacco smuggling as a high-return and relatively low-risk venture. Of particular concern to Customs is the possibility that:

The profits made by these syndicates can also be potentially used to fund other criminal activities.

In conclusion, the coalition believes that illegal tobacco smuggling is a problem that needs to be addressed rather than ignored, as it has been throughout the life of this Labor government. The coalition also strongly believes that Customs should be appropriately resourced to do the job it is tasked to do, which is to protect Australia's borders from outside threats. I urge the government at the very least to reinstate the funding it has cut from Customs cargo inspections so the legislative changes made by this bill will have some real chance of being enforced. With those words, as I indicated at the start, the coalition supports the bill.