Concerns over growing shisha tobacco black market

A federal politician and Australia’s customs agency fear a decade-old tax change has turned ethnic business owners away from legally importing tobacco popular in shisha bars.

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Molasses tobacco is commonly smoked through water pipes and is popular in Sydney and Melbourne ethnic communities in so-called “shisha,” or “hookah,” bars.

The tobacco is placed in a pipe, then heated by charcoal, and smokers inhale it through a mouthpiece.

But a federal politician warns a change in the way wet shisha tobacco is taxed may have opened a window for a black-market trade.

South Australian senator Skye Kakoschke-Moore is sitting on parliament’s inquiry into illegal tobacco.

“Nobody seems to know exactly how much of this product is coming into Australia that’s not being declared and how big the actual market is. We know from KPMG that they estimate the entire illicit tobacco market in Australia is around 14 per cent. Border Force disputes that, but they don’t have their own model yet to determine how much of the market is illegal.”

In 2008, tariff rules were changed so the tax on molasses tobacco was based on its overall weight, rather than just its tobacco content.

That made it more expensive.

The wet, heavy substance contains more than just tobacco, including ingredients such as honey, glycerin and chemicals to give it flavour.

Australian Border Force commissioner Roman Quaedvlieg told a Senate Estimates hearing last month molasses tobacco’s popularity and the declared amounts entering the country appear to conflict.

“There is a disparity between declared molasses and what we think is the consumption rate. That tells me indicatively that we have an illegal molasses-importation problem, and it’s something that we’re looking at.”

Senator Kakoschke-Moore says authorities should have anticipated it.

“It has been nearly a decade, and I think what’s happened here is there’s been a breakdown, in terms of forward planning. When the tax office changed their treatment of shisha, I don’t think that they anticipated it would drive the market underground to the extent that it did and that, in 10 years’ time, we’d be in a situation where the majority of our shisha has been imported illegally.”

Melbourne shisha-bar owner Ali Adam says the 2008 tax change had a severe effect on his business.

“When that happened, probably we lost about 30 to 40 per cent of our customers, just due to the price rise. (If) we start charging fair tax for this product, that will stop the smugglers, it will stop everything. (If) that will be the right price, it will go through the right channels.”

Senator Kakoschke-Moore says she is worried the profits made on shisha tobacco could be funding crime.

“It could be quite sophisticated criminals operating in a broader criminal network. The AFP have said that they would only look at this issue if they believed that there was a link between the importation of shisha and broader criminal-network involvement. Anecdotally, they’re starting to see that now. I would like to see that anecdotal evidence move to hard physical evidence.”

Border Force deputy commissioner Michael Outram says he agrees it needs further investigation.

“We’ve taken on investigations in relation to molasses tobacco. Again, one of the areas that’s of potential concern for us is the amount of money that can be raised and then sent back to other parts of the world and then used for nefarious purposes, and that’s another angle that we’re looking at.”

Last year’s federal Budget boosted funding for the Border Force’s Tobacco Strike Team by $7.7 million over two years.

Border Force officials say the force has expanded its mission from simply intercepting illegal tobacco shipments at the borders to disrupting and dismantling organised-crime rings.