Rohan Pike: Former Senior Australian Federal Police Detective on the impact of the illicit tobacco trade and what it could mean for New Zealand

A new report is sounding the alarm on the illicit tobacco trade. 

The Retail NZ report points to the growing black market, which drives crime, undermines public health efforts, and reduces tax revenue.  

A quarter of smokers are using illicit tobacco, with most sourced from China and the Middle East.  

Australia has faced similar issues, former Senior Australian Federal Police Detective Rohan Pike telling Mike Hosking that in the last three years it’s turned from a large underground market to open air violence. 

He says there’s murders, drive-by shootings, extortions, and firebombings. In addition, Government revenue has dropped from $16.5 billion six years ago to just $5 billion, with illicit cigarettes making up about 80% of the Australian market.  

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Episode Transcript

Speaker 1 (00:00):
New report from Retail New Zealand. This is on the
illicit tobacco trade, which is interesting given it's been a
huge issue in Australia for a while. Now. Black market
drives crime, hits tax revenue. There's a fifteen percent shortfall
in March alone. Now our own Pike's a former senior
Australian Federal Police detective Border Force Tobacco Strike Team leader,
happens to be in the country at the moment and
he's with us. Run morning to you, Morning, Mike. So

(00:22):
a ten billion dollar industry in Australia. It was funny
I was saying on Are earlier that I've been reading
about your problems in Australia before I even realized we
had our problems here. How long has it been a
problem in Australia and how big has it become in
terms of worry.

Speaker 2 (00:38):
Well, I've been telling the government about it since I
was in the Border Force ten years ago, that there's
a huge problem and it's going to get bigger. Unfortunately,
those predictions have come true and in the last three
years we've it's turned from a large underground market to
open air violence. So we've got murders, drive by shootings,

(01:00):
sidespread extortion, five hundreds of fire bombings and there were
two just yesterday in Brisbane. And there are ilicted shops
popping up everywhere, thousands of them. In my Suburbanlonne in Melbourne,
there's one street that has twenty illicit tobacco shops on it.
So the revenue, as you say, has gone down from
the government from sixteen point five billion six years ago

(01:21):
to five billion this year. These gangs, organized criminal gangs
are just making billions, getting stronger and more dangerous. Not
only that, the smoking rates are going up because people
have access to very cheap cigarettes, prices that they haven't
seen since last century. So in summary, the cigarette rate,

(01:42):
the illicit cigarette rates now about eighty percent of the
market and for vapes that's up over ninety five percent
of the market is illicit. So basically our tobacco policy
has failed on every level.

Speaker 1 (01:54):
So I'm assuming every politician in Australia would at least
accept quietly that what you've seen is true doing about them.

Speaker 2 (02:02):
Well, the government's not doing anything about it because they
are being advised by the Health Department, and the Health
Department have no expertise or experience in law enforcement, and
so this health issue has become a law enforcement issue,
and so the government being ill informed and making decisions
without the proper information we have had. Just last week

(02:24):
the coalition the opposition come out and say that they
would immediately drop the excise rate fifty percent, which is
the key driver. Of course, the government have increased enforcement
over the last couple of years, but really it's a
belated effort. The horse has bolted and they've only done
that because the criminals brought attention to themselves with all

(02:47):
their violence. So anyway, we're experimenting at the moment with
a little bit more enforcement. But certainly this retail report
here in New Zealand calls out the fact that there's
virtually no domestic enforcement in New Zealand, and that's one
of the vulnerabilities you have.

Speaker 1 (03:02):
But you see, right, I would argue that, I mean,
I haven't seen a fire bombing here, so I would
argue that, I'm sure we've got a problem, but it's
nothing like yours. So what's your assessment of our issue.
It's just that it's out there because we priced ourselves
out of the market with tax.

Speaker 2 (03:17):
Yeah, that's the key driver. Obviously, your ratio is three
to one at the moment from legal to illegal, our's
got to four or five times the illegal price, which
is you know, the trigger that influence that brings criminals
in and migrates customers over from the legal market. The
fact that we have violence is really just the criminals

(03:40):
fighting each other for market share. So that is just
a sign, a symptom really of the problem. Whereas if
criminals over here are clever enough to keep writing under
the radar, then the problem.

Speaker 1 (03:55):
Who are these criminals? Is it gains local, domestic international?
Who are they?

Speaker 2 (04:01):
Or changes from country to country. You've had your own
organized crime gangs here, as we did in Australia. Some
of them were interested in drugs, but now they've diversified
into tobacco because they realize it's a high profit, low
risk commodity that they can get into. And some of
our gangs have, as I say, diversified there.

Speaker 1 (04:20):
What happened to the whole smoke free thing? I mean,
if you get your smoke free down to I think
it's about five percent in this country people who are
still smoking, then you've got the vaping. They're all off
vaping now. Doesn't that sort of diminish the market there
for the damage.

Speaker 2 (04:33):
It does, and congratulations to you've done a fantastic job
in attempting to get to that goal of five percent.
I think you down to about six point eight. But
the illicit market seems to have flat flattened that success
rate out, so it hasn't actually increased or the smoking
rate hasn't decreased in the last three years, and that's

(04:53):
probably juus the availability of illicit Your treasury has lost
twenty percent as that reports as in the last year.
That's just people smoker is going straight over to the
ellsted market because that smoking rate hasn't gone down any further.
So in order for you to reach that five percent goal,
which would be an excellent result, than really the illicit
market needs to be.

Speaker 1 (05:13):
So what's the So is the sweet spot simply a
government lowering the tax to a point where it's acceptable
and then the health industry go nuts and go, oh no,
everyone's going to start smoking again. In other words, we
get to a point where there's a percentage of the
population who smoke rightly or wrongly, good or bad, and
the gangs go away because it's no longer profitable to
do what they do. Is that the answer or not.

Speaker 2 (05:35):
That's one of the answers is certainly finding a sweet
spot of the excise which both discourages people from smoking
but also doesn't encourage people from a lot of criminals
coming in to the market. So there is a sweet
spot there. But in addition to that, as this report
points out, you need a robust enforcement regime in order

(05:55):
to deter criminals from coming in. You don't have that
at all in New Zealand in Australia until very recently,
so you need to go from zero to one hundred
rapidly in order to actually enforce some of the regulations.

Speaker 1 (06:09):
We have good stuff right. Good to have you on
the program, appreciate it very much. Run Pike, who's the
former senior Australian Police detective and Australian Border Force Tobacco
Strike Team lead. For more from the Mic Asking Breakfast,
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