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Transcript of press conference: Port Botany, NSW: 6 May 2018: new Illicit Tobacco Taskforce and crackdown on illegal tobacco



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Kelly O’Dwyer MP

Minister for Revenue and Financial Services Minister for Women Minister Assisting the Prime Minister for the Public Service

TRANSCRIPT

PRESS CONFERENCE, PORT BOTANY SUNDAY 6 MAY 2018

E&OE

Subjects: New Illicit Tobacco Taskforce and crackdown on illegal tobacco

KELLY O’DWYER:

Hello, my name is Kelly O’Dwyer, I am the Minister for Revenue and Financial Services, and I am joined here today at the Sydney cargo examination facility for the Australian Border Force by the Australian Border Force Regional Commissioner, Dani Yannopoulos, and also by Will Day who is the Deputy Commissioner of the Australian Taxation Office.

The reason that we are here today is because the Government has a very important announcement regarding illegal tobacco. We know that the illegal tobacco market is dominated by criminal syndicates and these criminal syndicates use the funds that they gain through illegal tobacco to fund their other illegal activities.

The Government wants to shut down these illegal criminal syndicates. We want to shut down their funding sources and we want to stop the rip off of the Australian people. They are ripping off tax dollars from the Australian people and the Government says no more.

There is around about 600 million of tax dollars through tobacco duties that are ripped off we estimate each year. That’s why the Government is announcing today that we are establishing the Illicit Tobacco Taskforce. This is a taskforce that’s going to be headed up by the Australian Border Force supported by the Australian Taxation Office and it will involve other enforcement bodies right around the country.

We know our measures will raise around about $3.6 billion in additional revenues over the forward estimates period and that is because it will be focused on smuggling, on making sure we stop the warehouse leakage and finally on shutting down those domestic crops that have been springing up around Australia. A particular focus that the taskforce will have will be on investigations, on intelligence gathering, on actually disrupting these particular criminal syndicates and dismantling them, making sure that the enforcement action is taken against them using the new powers that are available and the new penalties that are available to the enforcement agencies, new offence provisions that, for instance, mean that there is a reasonable suspicion if you have got more than 5 kilograms of illicit tobacco product that you have in fact been involved in a crime and new penalties that will see people jailed for up to 10 years - up from 2 years. The Government is very very serious

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about this. We also want to make sure that the prosecutions take place as well so that those people who are doing the wrong thing by the Australian people are in fact not only fined but they are also locked up.

So today, as I mentioned, the Government is establishing an illicit tobacco taskforce. We are also making sure that we provide additional resources to the Australian Border Force and the Australian Taxation Office through this particular taskforce and we’re making sure that we change the framework so that people pay duty at the point in time at which it is imported rather than the point of time that it leaves the warehouse. This will provide much greater integrity measures around our taxation system and it builds on the broader integrity measures that we as a Government have been pursuing whether it’s multinationals who are avoiding or evading tax or plugging the gaps in the black economy.

These are important measures to make sure that the tax revenue that is owed to the Australian people is in fact paid to the Australian people. And finally I just wanted to point out that we expect normally when it comes to tobacco payments of around about $10.6 billion. They are the payments that happen and as a result of these measures we’ll see an addition $3.6 billion being returned to revenue over the forward estimates period so I might now ask Dani to tell you a little bit more about this place and the work that they do at the Australian Border Force and Will will also briefly talk about what the Australian Taxation Office has been able to achieve.

DANI YIANNOPOULOS:

Thank you Minister. So, last financial year the Australian Border Force’s current tobacco strike team collected more than 123 million cigarette sticks, 64 tonnes of tobacco - which is well over $100 million in evaded revenue. This work is going to continue under the focus of this new joint agency taskforce.

The Australian Border Force stops illicit tobacco each and every day through our sea cargo, through international mail and at our international airports. We use a range of technologies, our state of the art X-ray facilities as you can see here today, our detector dogs and of course our highly skilled Australian Border Force officers. As you may know tobacco is one of the highest taxed commodities in Australia and across the world. This makes it very attractive for organised criminals to import tobacco across the border. Those profits are then channelled back in to organised crime. The Australian Border Force has a proven history of disrupting the supply of illicit tobacco and dismantling the associated criminal networks and we look forward to continuing this work with our colleagues in the ATO.

KELLY O’DWYER:

Thank you Dani. We will now invite Will Day to speak.

WILL DAY:

Thank you Minister, good morning. It’s a great pleasure to talk about the important work that the ATO does to disrupt the criminal tobacco trade. It has actually been illegal to grow any tobacco in Australia for more than a decade and the ATO’s role is to seize and destroy tobacco grown in Australia as well as to disrupt the profit making activities of the organised crime syndicates who steal from the community by not paying the taxes that they should. We are achieving strong results and through this taskforce we will be able to further strengthen those results. In the last two years we have conducted 26 operations, we have seized and destroyed 215 tonnes of illicit tobacco worth an

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approximate $180 million in excise duty foregone. In one landmark operation earlier in March of this year seized nearly 30 tonnes of illicit tobacco including 45,000 seedlings, again with an estimated excise foregone of nearly $30 million. We are committed to working with our colleagues at the Australian Border Force and across our Commonwealth and state law enforcement partners. We welcome any of these measures that will further strengthen those relationships and strengthen our ability to deal with the criminal tobacco trade. Thank you.

KELLY O’DWYER:

Thanks so much Will. Thank you very much to the ATO and the Australian Border Force for the great work that you do as agencies helping to protect the integrity of our taxation system and protect the Australian people - after all, the taxes that come into this country are relied upon by Australians to provide the essential services that they need each and every day. It is the duty of the Government to make sure that we protect that revenue for the Australian people which is why this announcement is so important.

I might throw open to questions now.

JOURNALIST:

The $3.6 billion figure, what sort of modelling process has this gone through?

KELLY O’DWYER:

The modelling has gone through all of the usual modelling processes associated with the Budget process, there has been nothing unusual in the way that this has been modelled. Obviously all of the budget papers will be released on Tuesday evening when the budget is actually handed down but this is, we believe, a reasonably conservative estimate because we always provide reasonably conservative estimates in terms of revenue we expect to raise and we are very confident that the Government will see a significant increase in revenue by disrupting these criminal syndicates by making sure we get our hands on the illegal tobacco that is coming into this country and by making sure that the tobacco that is imported is imported by those people who in fact are legally able to import tobacco and that’s why we are making a change to make sure that by the 1st of July next year, those people who are importing tobacco actually need a licence to do so and that they are paying the right amount of tax.

JOURNALIST:

Inaudible

KELLY O’DWYER:

Sorry I didn’t catch the first part of your question, I’m sorry.

JOURNALIST:

Inaudible

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KELLY O’DWYER:

We believe making sure the Australian people keep more of what they earn is absolutely fundamental. Governments should only take in tax that it needs to in order to perform the services that governments need to deliver. I don’t think that we should ever forget that the money that is actually raised through taxes, through income taxes from the Australian people is money that people have worked incredibly hard for so it’s not some sort of give away, it’s simply giving people back the money that they have earned themselves, making sure that they’ve got more money in their pocket. The Treasurer will be making some announcements in relation to tax cuts on Tuesday night, it’s not very long now, I’m not going to steal his thunder. On Tuesday night he will be able to tell you on Tuesday night.

JOURNALIST:

I have a question from Queensland, will there be funding for Brisbane’s cross river rail project in the Budget?

KELLY O’DWYER:

Like I said, the budget is going to be handed down on Tuesday night, certainly there is very significant spending on important infrastructure projects right around the country. That has been a real focus of our Government in making sure that we actually build the infrastructure projects that will keep our people moving and keep our economy moving. As I said, as much as I’d like to be able to announce the budget here today to all of you, it’s actually going to be handed down by the Treasurer on Tuesday night so not long now.

JOURNALIST:

Inaudible

KELLY O’DWYER:

Unfortunately when we came into Government we actually did inherit significant deficits as far as the eye could see, year after year, and significant debt. Of course this was not something that the Labor Government inherited when they came into government. In fact all debt had in fact been paid off. There was no net debt, in fact that means there was in fact money in the bank, there was a surplus and there was money in the bank so that when we went through difficult times we were able to weather those difficult times. It is important that we do what we need to do to repair the Budget. Certainly the previous Labor government left us with a very damaged budget and we have been doing all that we can to repair it to make sure that we cut spending that is not necessary spending, that we live within our means. That is a very important message. Everybody out there who’s sitting around their kitchen table understands what it is to live within your means. We always deliver responsible budgets, as I said it’s not long now till Tuesday the Treasurer will hand it down and you will see that this budget is a responsible budget, it is a fair budget and it’s a budget that puts the Australian people first.

JOURNALIST:

On the big business tax cuts - can you see banks excluded and [inaudible]

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KELLY O’DWYER:

The Royal Commission is only part way through and we’re not going to pre-empt the findings of the Royal Commission. We expect to hear their recommendations next year, although we understand that we will have an interim report of the Royal Commission before the end of this year. We don’t want to interfere with any of the recommendations that they might make. It is fair to say that banks and financial institutions have been found wanting in terms of how they treat their customers and in terms of the behaviour that they have engaged in. That is why the Government did in fact establish a Royal Commission and why the Government has been so focused on making sure that we have lifted the standards of financial providers, that we have put in place a complaints mechanism that can see people go to a one-stop shop if they have got a complaint against a financial institution and for the first time be able to actually access compensation, compensation in some instances of up to $2 million - now that one-stop shop will be up and running three months before the Royal Commission will provide its final recommendations. It will be up and running by no later than the first of November this year and it will have a real practical and measurable impact. In terms of company tax cuts we believe it’s important to actually provide company tax cuts across the board because by cutting company tax you are encouraging investment. When you encourage investment you grow the economy and you create more jobs and you can actually increase wages in that environment. We don’t believe that you can pick and choose who you can give company tax cuts to because that would mean that you would start applying a morality clause to businesses whether they are big or small as to whether in fact they should get a company tax cut. It does simply doesn’t make sense and we know there are economy wide benefits when you cut company tax across the board.

JOURNALIST:

Minister, has the increase in black market tobacco been driven by your repeated increase in the tobacco levy?

KELLY O’DWYER:

Absolutely not, we have been taking action as you’ve heard from both the Australian Boarder Force and the Australian Taxation Office on this particular issue for many, many years. Certainly we believe it is important to protect Australian consumers against harmful products and we have looked at the World Health Organisation recommendations around how much tax ought to be paid on these products in order to discourage people from purchasing these products that could do them harm. Now we are actually below the recommended levels at the World Health Organisation but we are within the right sort of ambit. We have increased taxes on these tobacco products and we make no apology for that. Our announcement today is not about increased taxes, it is about enforcing the law, it’s about making sure we have the right structure in place to crack down on illegal criminal syndicates who have been ripping off the Australian people because they are not paying tax and because they are doing the wrong thing. They are going to face increased jail times, increased penalties and as I said we make no apologies for that.

JOURNALIST:

Isn’t it true that increases in the tobacco levy are largely borne by [inaudible] Australians?

KELLY O’DWYER:

It is true that it is important to actually have high taxes on tobacco products because of the consumer harm that can occur from the consumption of these products. As I mentioned the World

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Health Organisation has made recommendations to government around about how much tax should be paid on these products so as to provide a disincentive to those people who might purchase them. The Government is actually below those recommended levels, not that much below, but certainly below the recommended levels set by the World Health Organisation. We believe it’s important to actually get the balance right. We also believe it’s critically important that the taxation revenue, around about $600 million that we estimate each year, that is foregone in terms of taxation duties that ought to be paid to the Australian people is in fact paid which is why we have established the Illegal Tobacco Taskforce to combat that illegal trade - to crack down on these criminal syndicates to disrupt them and to send those people who are engaged in this activity to prison for a very very long time.

Thanks very much.

[ends]

Media contacts: Lachlan McNaughton 0433 642 145, Emma Nicholson 0481 909 550

The Hon Kelly O’Dwyer MP, Melbourne