SMOKY DEALS

BLACK marketeers are running a flourishing multi-million-dollar illegal
tobacco trade in Victoria.

Cheap tax-free tobacco is readily available at many Victorian tobacconists,
milk bars, markets, factory car parks and other outlets.

Buyers of the illegal product can make up a pack of 25 cigarettes for 75
cents, more than $5 cheaper than a legal pack.

The Herald Sun was easily able to buy materials to make a carton of 200
filter-tipped cigarettes for $6, compared to the retail price of about $45.

An INSIGHT investigation has discovered:

BLACK marketeers have swamped the market in the past year and are turning
over about $45 million a year in cash sales.

THE tobacco industry has been told organised crime gangs, including bikies
and Asian and Lebanese syndicates, are behind much of the racket.

FEDERAL and state governments are being defrauded of more than $150 million
a year in lost tobacco revenue.

THE tobacco industry has estimated the size of the illegal trade at 750
tonnes a year.

ILLEGAL tobacco sales cost legitimate tobacco and cigarette retailers about
$34million a year in missed sales.

AN Australian Customs taskforce has been established to crack down on the
racket.

CUSTOMS investigators are using criminal intelligence databases, and other
sources, to establish the level of organised crime involvement in the
tobacco black market.

MEMBERS of the Myrtleford-based Tobacco Co-operative of Victoria this week
met Customs and tobacco industry representatives to discuss the illegal trade.

All legal tobacco commercially sold in Victoria is grown in the Myrtleford
region and Customs sources said it appeared most of the state's illegal
product was also coming out of the area.

It is attractive for growers to sell to the illegal market because they get
only $1.80 to $7.35 a kilo from Rothmans, Wills and Philip Morris, the
three legitimate tobacco manufactures in Australia.

Black marketeers pay growers about $20 a kilo cash in hand.

Customs investigators say the illegal tobacco trade is becoming
increasingly sophisticated.

"It's certainly a very organised racket, we just haven't established yet
who the organisers are," a Customs source said.

"They have an organised structure where they buy it in on a regular basis
and have many established retail outlets to ensure quick turnover of the
product," a Customs source said.

It is illegal to buy and possess tax-free tobacco, as well as illegal to
sell it.

Federal Customs Minister Warren Truss has been briefed on the size of the
black market problem and has vowed to provide resources to counter it.

He recently congratulated Customs investigators after they seized tonnes of
illegal tobacco and closed down an unlicensed tobacco packing and cutting
factory in Springvale. The gang operating it had evaded at least $5million
in federal excise duty.

Customs found evidence that at least 31 tonnes of illegal tobacco had been
processed through the operation, which was elaborately disguised as a
plastics moulding factory.

Mr Truss said many legitimate businesses were being harmed by such illegal
operations.

"By avoiding tax, these shonky operators can sell their product
significantly cheaper than companies which are legitimate traders that
abide by the law," he said.

"The effect of these cheaper prices is to eat into the market share,
profits and even employee numbers of legitimate operations.

"It's unfair that employees of legitimate companies are put at risk by
these tax-evading rackets that operate out of shady premises down back
lanes with little or no attention to normal manufacturing standards."

Checked-by: Pat Dolan