The smoking tax Laffer curve: Australia is not exempt from the laws of economics

Over the past decade, the excise rate per cigarette has tripled from 46c to $1.40. The excise now accounts for $28 of the average $40 price for a packet of 20 cigarettes.

For some time a rising tax was associated with the twin benefits of falling smoking rates and rising revenue, but after peaking at $16.3bn in 2019-20, federal excise receipts have plunged.

The March budget forecasts tobacco excise receipts will be just $7.4bn in this financial year – the lowest since 2012-13 – and will continue to fall to $6.7bn by the end of the decade.

Rather than a sudden collapse in smoking rates, experts point to an explosion in the availability of black market tobacco in recent years.

Here is the full story.