letaifixit

Crime + tax · Issue

Why are tobacco shops being firebombed in Australia?

Written by an AI, prompted by a human, checked against the linked sources. Updated 2026-09-08. Spotted an error?

Short answerMore than 100 Victorian tobacco shops were set on fire between March 2023 and October 2024, according to Victoria Police figures reported by The Guardian. The fires are a turf war over illicit tobacco, a market the ATO says cost $3.2 billion in unpaid excise in 2023-24. Cause: excise so high that untaxed cigarettes pay better than drugs, and Victoria had no retail licence to revoke.
$3.2bn
excise lost to illicit tobacco in one year (ATO, 2023-24)

What's happening?

  1. Victoria Police linked more than 100 arson attacks on tobacco shops to the illicit tobacco turf war in the year to October 2024.Source: The Guardian, 9 Oct 2024
  2. The ATO estimates 1,741 tonnes of tobacco sold in 2023-24 was illicit. The duty that should have been paid on it: $3.2 billion.Source: ATO tobacco tax gap, latest estimates
  3. Annual tobacco excise revenue has more than halved over five years to $7.8 billion, with the ATO estimating roughly a quarter of cigarette sales are now illegal.Source: The Guardian, 11 Dec 2025
  4. Tobacco excise collections have fallen short of budget forecasts every year since 2022; the cumulative shortfall reached $31 billion.Source: Sydney Morning Herald, 18 Mar 2025
  5. Taskforce Lunar (Victoria Police) reported 28 active arson investigations covering tobacco stores, vehicles, gyms, restaurants and private addresses in a single AFP release.Source: Australian Federal Police media release

Why is it happening?

The tax makes the crime pay.

Excise on a legal pack of 20 is near $30. A container of untaxed cigarettes sells at a fraction of that with no excise paid. The Australian Crime Intelligence Commission put the revenue hole at $3.3 billion and said one in five sales is now illegal. A margin that big attracts organised crime the same way any other prohibition does.

Source: The Guardian, 6 Nov 2025

Victoria had nothing to revoke.

Until 1 July 2025 Victoria did not require a licence to sell tobacco at all. A shop caught selling illicit product could not lose a licence it never had. Licence applications opened 1 July 2025 and, per the Act, enforcement of selling without a licence starts no later than 1 July 2026, roughly three years after the first fires.

Source: Victorian Auditor-General's Office, Tobacco licensing

Split responsibility.

The Commonwealth sets and collects the excise and runs the border. States police the shops. Each side can point at the other while the gap between legal and illegal price keeps growing.

Source: Centre for Independent Studies, Analysis Paper 95, Nov 2025

How would you fix it?

Ranked by how much of the problem each one removes, in the AI's opinion, based on the facts above.

  1. Freeze the excise and review it against the ATO tax gap each year.Every increase since 2022 has produced less revenue, not more. Stop the automatic escalator until the gap closes. Tie future changes to the measured gap, not to a forecast.
  2. Make the licence a real weapon: instant suspension, landlord liability.A licence only matters if losing it hurts. Copy the liquor model: on-the-spot closure for illicit stock, and make landlords who keep leasing to unlicensed sellers liable, so the shopfront itself becomes hard to rent.
  3. One national taskforce with one budget, not two levels pointing at each other.Border seizures (Commonwealth) and shop raids (state) need one command and shared intelligence. Publish monthly counts of seizures, closures and prosecutions so the public can see if it is working.
  4. Publish the data monthly.Arson counts, licence numbers, seizures and excise receipts already exist inside agencies. Put them on one page, updated monthly. You cannot fix what you will not count in public.

What fixing it could save?

$0.8–1.9 billion
a year, low to high. OUR estimate, not a government figure. Built from the linked sources and the assumptions below.
  1. Start from the ATO's 2023-24 illicit tobacco duty gap of $3.2 billion (government figure).Source: ATO tobacco tax gap
  2. OUR estimate: licensing with real teeth plus a single taskforce recovers 25% (low) to 60% (high) of that gap. Not all of it comes back: some smokers quit or cut down when prices rise, which the CIS paper flags as behavioural adjustment.Source: Centre for Independent Studies, AP95
  3. Not counted: avoided arson damage, police and fire costs, insurance. No public annual total exists, so nothing is added.letaifixit.org note

Every line marked OUR estimate is an assumption made by an AI for this experiment. Government figures are marked as such and linked. Change the assumptions and the range changes; that is the point of showing them.

Questions people ask

How many tobacco shops have been firebombed in Victoria?

Victoria Police linked more than 100 arson attacks to the illicit tobacco turf war by October 2024 (The Guardian, 9 Oct 2024). Later counts vary by source; we only cite the police-linked figure.

How much tax does Australia lose to illicit tobacco?

The ATO's own tax-gap estimate puts the unpaid duty on illicit tobacco at $3.2 billion for 2023-24.

Does Victoria license tobacco shops?

Only since 1 July 2025. Before that no licence was needed. Enforcement of selling without a licence commences no later than 1 July 2026 (VAGO).

How much could be saved by fixing this?

Our estimate is $0.8–1.9 billion a year. It is an AI's estimate built from the linked public figures and stated assumptions, not a government number.

Written by an AI, prompted by a human, checked against the linked sources. This page is opinion generated by an AI model from the linked public sources. It discusses public bodies, programs and policies, never private individuals. It is an experiment, not journalism or advice. Full disclaimer · Request a correction