Illicit tobacco: NZ govt needs to take swift action - Retail NZ

A retail industry group is sounding the alarm over figures estimating black market tobacco makes up a third of all tobacco consumed in the country.

A report - prepared by FTI consulting for the tobacco industry - says 33.5 percent of tobacco consumed was comprised of illicit products, increasing from 27.2 percent in the previous year.

However, an anti-smoking advocate says the numbers do not add up.

RNZ has been investigating the issue since March, uncovering multiple shops operating in Auckland selling the cheap tobacco products.

An East Auckland store was charging just $13 for a pack - less than half the excise duty required by law.

Importing cigarettes without paying the excise duty is illegal, and offenders can be charged with defrauding customs revenue.

It was also illegal for retailers to sell illicit cigarettes, with offenders facing a six-month prison sentence, a $20,000 fine or both.

Excise rates on tobacco have continued to rise, while excise revenue fell by two million dollars from the 2024 to 2025 financial year to $1.47 billion, according to data from the Treasury.

The government in May announced an action group made of Customs, police, and the health sector to crack down on those selling illicit tobacco.

Retail NZ had called for a task force to be established, and its chief executive Carolyn Young told RNZ said the numbers were concerning.

She said illegal tobacco sales were run by international organised crime groups in Australia.

"They'll be looking at New Zealand as an easy jump step, an additional state of Australia if you like, and they'll know the ways in which to put it in place."

Young wanted to see quick action taken by the New Zealand government to ensure international organised crime did not end up running tobacco in the country, "and therefore, running a whole lot of illegal activity that is going to do harm to our communities".

Earlier this month, Australia's Bureau of Statistics released a report that estimated 80 percent of nicotine products consumed in Australia last year were illegal - up from 12 percent in 2017.

Stats NZ confirmed with RNZ it had not conducted a similar illicit tobacco and nicotine consumption study, and  there was no study underway, nor was one planned.

"The Household Income and Living Survey collects expenditure information on tobacco and nicotine products in NZ  households. However,  the number of respondents reporting illicit tobacco and nicotine products has always been very small," a spokesperson said.

"When respondent numbers are this small, we do not publish because the sample error is so high the data is not useable."

Young said a local study using tips from Australia could be workable here.

"There's ways in which they could sit down with our cousins in Australia and understand better what it is they did and what was the basis around how they did that piece of research, and look at how that could be applied in New Zealand," she said.

'I don't think FTI's numbers reconcile with other sources'

Action for Smoke Free Aotearoa (ASH) head Ben Youdan said the numbers from FTI should be scrutinised.

He said there was increasing evidence that there was more illicit sources of tobacco in New Zealand, with increased seizures and examples of the ability to buy cheap cigarettes through social media.

"However, I don't think FTI's numbers reconcile with other sources, so even the budget statement that came out the other week, the drop in tobacco tax revenue in the last three or four years certainly doesn't reconcile with a third of the market now being illicit."

Youdan said it there had been a much smaller drop in tobacco tax than would be expected had the illicit market "exploded that much".

"Stats NZ are correct in that it's quite a hard thing to estimate because you can ask people. But you've got to be clever about how you ask them because people are not going to readily admit to doing something illegal or purchasing something that they probably shouldn't have," he said.

He said discarded packs could be surveyed to look for ones without New Zealand warnings.

"And also look for other indicators, such as whether cigarette consumption or reported smoking rates match with what's being released to the market or imported into the country."

He said there could also be a big drop in tax revenue if illicit tobacco had jumped to a third, which had been seen in Australia, but not here in New Zealand.

Meanwhile, Customs chief officer for fraud and prohibition Nigel Barnes told RNZ the action group hoped to deliver results shortly.

"It will be within the coming weeks and months," he said.

"Some of the things we want to do for example is involve the police asset recovery unit in recovering the ill-gotten gains from some of these organised criminals, and that does take longer than a few weeks."

Barnes said the action group aimed to deliver a cohesive interagency approach, focused on disrupting transnational and serious organised crime activity in the illicit market through intelligence and information sharing.

RNZ has approached the Ministry of Health for comment.

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