The Government has used its 2018 federal budget to announce new revenue from a crackdown on illegal tobacco. But Liberal Democrats senator David Leyonhjelm says the measure will 'never raise anything like $3.3 billion', forecast in the first year, claiming the Government has assumed most illegal tobacco smokers will switch to legal product. But Senator Leyonhjelm's claim is ill-informed. Tobacco is imported into Australia without being taxed at the border. It is only when this imported tobacco leaves storage warehouses that a tax is levied. Under the Government's plan, from July 1, 2019 tax will be levied on tobacco as soon it enters Australia. As a transitional measure, duty will also be applied to all tobacco stored in warehouses on that date. Importers will have 12 months to pay. This will bring forward revenue that otherwise would have been paid in later years, accounting for most of the estimated increase in revenue. Although the Government is also anticipating a lasting impact ' predicting that taxing at the border will reduce the illegal removal of tobacco from warehouses before duty is paid ' there is no suggestion in the budget papers that a change in consumer behaviour is expected to have a major effect on tax revenue.
Verdict: Ill-informed