How $40-a-pack cigarettes pushed Australians to the black market

Tax hikes made cigarettes in Australia the most expensive in the world. They have also helped fuel a multibillion-dollar criminal enterprise in bootleg tobacco

By Victoria Kim

 

A retired math teacher descended into an underground parking lot in search of her dealer, cash in hand.

 

Headlights flashed from the far end of the garage in a beachside, middle-class neighborhood in suburban Melbourne, Australia. She walked up to an unmarked van and soon was back above ground with the illicit goods.

 

A carton of cigarettes.

 

Australia has the most expensive cigarettes in the world, a pack of midmarket cigarettes costing on average about 55 Australian dollars, or almost $40, nearly double what it will set you back in New York City. A series of steep tax hikes — eight in 10 years — were put in place to reduce the rate of smoking, which has steadily declined. But the high prices have also given rise to a thriving black market now estimated to be a multibillion-dollar industry that accounts for as much as half of all tobacco sales in the country.

 

“It’s the injustice of the situation,” said the retired teacher, Pat Felvus, 75, who recounted in an interview her early experiences of buying illegal cigarettes, which cost as little as 10 Australian dollars a pack. “Why would you pay four times the amount?”

 

Bootleg cigarettes are readily available on every main street in Australia — at convenience stores, candy shops and tobacconists. Competition has driven the price of under-the-counter smokes lower and lower, at a time that the cost for staples is rising. Violence has erupted between organized crime groups jostling for a slice of the lucrative market, with a spate of firebombings, extortion, shootings and homicides.

 

The scale of the black market and the criminality has raised questions about how far governments can raise so-called sin taxes to curb undesirable behaviors. Australia is now facing the quandary: Are the high cigarette prices doing more harm than good?

 

The government has said that Australia faces an illegal tobacco “crisis.” But it has refused to back down from the tax hikes or acknowledge the role they may have had in fanning the illicit trade, even as it loses billions in tax revenue. The World Health Organization advises that taxation is “the most cost-effective way to reduce tobacco use.

 

Australian officials have instead been pouring resources into toughening laws and enforcement efforts — which critics say is a Whac-a-Mole approach that will not address the underlying profit motive driving the problem.

 

“What we’ve done is caused a pseudo-Prohibition,” said Rohan Pike, a former federal police detective who led a tobacco task force for the Australian Border Force. “It has spawned an organized crime marketplace.”

 

Until a few years ago, Ms. Felvus was paying full price, about 50 local dollars a pack. She has smoked light cigarettes since she was 19, except when she was pregnant with her daughter. (She lit up in her hospital bed after giving birth, this being 1978.)

 

“You’re mad buying them in the traditional shops,” a smoker friend told her, she recalled.

 

She walked into a shop in her neighborhood with signs on the window for tobacco and asked for cheap cigarettes. “It felt a bit like somebody was going to tap me on the shoulder or something,” she recalled. “I did feel a little naughty.”

 

But the man behind the counter showed her a selection of bootleg smokes, and she got her cigarettes for about $14 a pack. A few months later, the store’s windows were smashed in. She met the shopkeeper at a parking lot to get her smokes, twice, while he was getting set up at another storefront down the street, she said.

 

Most illegal cigarettes in Australia are smuggled in from parts of the world with far lower prices, like the Middle East or China. Manchester cigarettes, reportedly manufactured in the United Arab Emirates, and Double Happiness, a Chinese brand, have become the go-tos for many people.

 

The smashed window at Ms. Felvus’s local shop may have been part of the violence that has been called the “tobacco wars” between criminal gangs vying for market share. The police have said there have been at least 100 cases of firebombings related to the turf war among organized groups, concentrated in Melbourne, Australia’s second largest city. One group has tallied more than 250 attacks.

 

In January 2025, a 27-year-old woman was killed after an arson attack on a house that the police said had resulted from attackers linked to the tobacco feud targeting the wrong address.

 

“It used to just be a health problem, and it’s now it’s a crime problem,” said James Martin, a criminologist and professor at Deakin University. “We’re opening up this massive new front in the war on drugs.”

 

Shopkeepers have been forced into selling bootleg cigarettes or surrendering their stores to be run by the criminal gangs, according to the authorities and news reports. In one video released by the police, a man can be heard threatening a cashier to hand over the keys.

 

“In 24 hours, I’ll be back and if this shop is still open, I’m going to come down and burn this whole place,” the man says in the recording.

 

Jacqui McQueen, 44, a domestic violence support worker who lives in Geelong, a working-class city west of Melbourne, said she could think of 20 shops in her immediate area where she could pick up illicit cigarettes.

 

“People don’t bat an eye anymore,” she said. “The government were expecting people to quit and it didn’t work that way.”

 

Ms. McQueen said she started smoking at 17 but quit a few years later, after she became pregnant with twins and was raising young children. She took up smoking again to deal with stress when one of the twins was diagnosed with an aggressive cancer, which eventually killed him at 11.

 

She was paying about 15 Australian dollars for a pack of 30 when she resumed smoking around 2010, Ms. McQueen recalled. The prices just seemed to skyrocket from there. The last time she bought a legal pack, it cost around 62 Australian dollars for 25 cigarettes, she said.

 

Ms. McQueen said she had been loyal to her Winfield Optimum Crush Blues until a worker at a regular shop offered up the cheaper kind. With her youngest son still living with her and grandchildren she often cooks for, the cost savings made a substantial difference on her finances, she said.

 

In September, Australia once again raised its taxes on cigarettes, bringing the excise levied on each individual cigarette to about 1.50 Australian dollars, triple the level a decade ago.

 

Jake Goodrem, 34, a plumber, said he largely gave up smoking and now sporadically vapes, not because of the rising cost, but because of health concerns. He still buys the occasional pack for his partner — the black-market ones, he said.

 

He said he could not imagine going back to paying full price for the legal kind.

 

“Even if I was a millionaire I still wouldn’t,” he said. “You’d have to be stupid.”