"A Pack of Cigarettes at 57,000 Won: Who's Buying? ... Australia's Black Market Captures 55%"

Legal Cigarette Prices Triple, with Over 70% in Taxes
Black Market Reaches 8 Trillion Won, Crimes Targeting Retailers Spike
Korea Keeps Cigarette Prices Frozen at 4,500 Won for 11 Years

In Australia, which has been raising tobacco taxes for over a decade to reduce smoking rates, an unexpected side effect has emerged. As the price of a pack of cigarettes nears 60,000 won, some smokers are turning to cheaper illegal cigarettes, causing the black market to grow rapidly.

Cigarettes Illegally Distributed in Australia. Heraldsun

According to the Financial Times (FT) on September 29 (local time), the Australian government is focusing its efforts on cracking down on the recently booming illegal tobacco market. Australia has imposed high taxes on tobacco products to reduce smoking-related diseases. As a result, the price of a pack of cigarettes in Australia has risen to about 60 Australian dollars (roughly 57,000 won). Since December 2016, prices have roughly tripled, and it is reported that more than 70% of the retail price now consists of taxes.

Cigarette Prices Triple... Illegal Cigarettes Take Over Half The Market

As prices soar, more consumers are seeking illegal cigarettes, which are much cheaper than legal products. The price of illegal cigarettes is about one-fifth that of regulated products. James Martin, a professor of criminology at Deakin University, said, "In terms of market share, the black market is essentially functioning like 'Big Tobacco,'" adding, "There has never been a precedent for such a large black market forming so quickly."

The Australian tobacco regulatory authorities estimated last year that illegal cigarettes accounted for about 55% of the entire tobacco market. The annual market size for illegal cigarettes and e-cigarettes was analyzed to be about 8.5 billion Australian dollars (around 8 trillion won). This is roughly double the combined markets for marijuana, cocaine, ecstasy, and heroin.

The distribution network and crime associated with illegal cigarettes are also spreading quickly. Illegal cigarette sales, which used to be concentrated online and through temporary outlets in parking lots, have recently spread to ordinary shops such as barbershops and fruit stores. In Melbourne and Sydney, there have been a series of arson attacks targeting cigarette retailers, and last year, a 27-year-old woman was killed in an attack linked to a related crime ring.

The Australian Senate has identified that three people have died so far due to violent incidents connected to the cigarette black market. Theo Foukkare, head of the Australian convenience store industry association, stated, "There have also been robberies and extortion involving the theft of legal cigarettes, which are then resold illegally. The situation is getting close to being out of control."

Tax Revenue Plunges, Policy Failure Debates... Government Maintains High Taxation

Tobacco tax revenue has also declined significantly. Australia's tobacco excise tax revenue peaked at about 16 billion Australian dollars (about 15 trillion won) in 2020, but last year it fell to less than half that amount. The Australian Treasury forecasts that by 2030, tobacco excise revenue will drop to about 2 billion Australian dollars (around 1.8 trillion won).

Police are conducting a crackdown on a tobacco shop in Australia. Photo by ABC AU News

Chris Richardson, an economist who has been tracking tobacco tax increases, strongly criticized the current situation. He said that all three major objectives—improving public health, securing tax revenue, and curbing organized crime—are being undermined, describing the current policy as a "complete failure."

The Australian Senate also warned in a report last month that the illegal cigarette market had already reached a "tipping point," and recommended halting any further tax hikes. The opposition Liberal Party and One Nation party are calling for a reduction in tobacco excise. However, the Australian government maintains its stance on high tobacco taxation.

Mark Butler, the Minister for Health, emphasized in an interview with ABC that the problem of illegal cigarettes is a serious issue not only for public health but also because of its links to organized crime, and declared that the current policy direction would be maintained.

One Pack of Cigarettes in Korea: 4,500 Won... Price Unchanged for 11 Years

So, how does Korea compare? The price of cigarettes in Korea remains significantly low compared to major countries. According to the World Health Organization (WHO)’s "Global Tobacco Epidemic Report 2025" published last year, the price of a pack of cigarettes in Korea has stayed at 4,500 won for 11 consecutive years, which was 3.25 dollars at the time based on the exchange rate. In the UK, the same price was 13.4 pounds (17.21 dollars), more than five times higher than Korea in simple dollar terms.

Cigarettes are displayed at the counter. Photo by Yonhap News

The government’s tax reform plan for 2026, announced on August 3, did not include any increases in the cigarette excise tax for conventional cigarettes. Korea also has a high tax component in its cigarette prices. More than 70% of the price of a 4,500-won pack consists of taxes and surcharges, including individual consumption tax, tobacco consumption tax, local education tax, National Health Promotion levy, and value-added tax.

However, a distinctive feature is that both the tax amount and final sales price have effectively remained fixed for more than ten years, rather than just the tax rate itself. In March, the government announced a comprehensive national health enhancement plan, proposing a review of cigarette pricing policy as a mid- to long-term direction. However, after projections that the price could rise to 10,000 won surfaced, the Ministry of Health and Welfare promptly clarified within three days, "We are not currently considering a cigarette price increase."

One reason the government remains cautious about raising cigarette prices is the inflationary pressure. When cigarette prices were increased from 2,500 won to 4,500 won in 2015—a rise of 80%—the hike led to a 0.58 percentage-point increase in the consumer price index for January that year. Experts pointed out that "since cigarettes are a frequently purchased item and included in the consumer price index, a sudden price increase is immediately reflected in inflation indicators, which acts as a burden on the government's policy."

This content was produced with the assistance of AI translation services.