BIG INTERVIEW
PATRICK GANGULY
18 ASIAN TRADER 27 JUNE 2025
Primarily, illicit tobacco and vape
products thrive because they are cheap.
We have seen decades of taxes imposed on
the trivial pleasure of smoking, to the
point where – after years of an ongoing
cost-of-living crisis – illegality trumps
obedience to the law.
“Consumer choice and affordability
are quite linked together, and that’s the
tobacco compel the retailer to become the
enforcer.”
In other words, when you look at these
policies and try and put them into play, the
Government is now transferring that
ownership onto the retailer, onto the
manufacturer. But that is not the retailer’s
job. The retailer is not a pseudo policeman.
The retailer is there to serve the customers
in their community.
“We are there to support the retailers,
Smugglers’ Cove
The other aspect of tobacco and vaping
legislation is, of course, the relentless
increases in tobacco tax over the decades,
which hasn’t hit vapes yet, but could well do
so (“for health reasons”) as soon as October
2026. There’s so much tax on cigarettes now
that people are increasingly patronising the
illegal market.
We know from the Laffer Curve that tax
revenue drops off quickly beyond a certain
strand of where this thing starts,” Patrick
agrees.
“If you continue to tax something to a
point where it becomes unaffordable,
either you choose to quit it, or you choose
to find substitutes and alternatives. That’s
where illicit vaping products started
coming into Australia, obviously, at a small
level initially, but then – because it’s quite
lucrative even at the lower prices – mas
sively.
“It’s very simple, because taxation on
tobacco, for example, is almost 76 to 78 per
cent, so if you supply the product at a very
cheap price, because you’ve legally not
paid tax on it, it remains very profitable.
But it’s not profitable for the Government.
It’s not profitable for the manufacturer,
and it’s not profitable for the good actors,
for the retailers.”
There are other consequences for the
retailers in addition to the loss of rev
enues, however – more serious and
possibly physical consequences, because
unenforceable laws affecting vapes and
but the retailer today is a under physical
threat, with attacks in-store, with the
amount of stock that they carry. Is this a
community and an environment that is
sustainable in the longer term if this
continues to happen without any inter
vention?
“What tends to happen is there are
threats to the retailers – to their own lives
and livelihood – but ultimately you end up
in criminal warfare, gang wars,” adds
Patrick. “We’ve seen plenty of that. You
asked me the question about, where is that
in terms of UK, and is it different? So the
weather in Australia is certainly different
to the UK. But when it comes to this trend,
it’s actually quite similar.”
I ask Patrick how the industry can
respond to what looks like an impending
legislative fiasco. In a sense, companies
like Imperial Brands should be the
Government’s partner in regulating the
market, upholding standards, taking care
and making sure the distribution is tight –
Track and Trace, other forms of coopera
tion. Ultimately, by keeping illicit actors
out of the market, the producers increase
revenue for the Government.
“They should have you as allies, but
what actually is the relationship?” I ask.
“In terms of trying to work with the
Government and giving them information
on what’s working and what’s not work
ing, we have a very good team that is trying
to engage at every possible step of the
way,” he says.
“We work with associations to try and
bring that to life. Is the Government
listening? And is that making an impact? I
think there are facets of Government that
may be taking it into consideration, but as
a sum total, no, the Government is not
there yet.”
level. But at this point, it’s a Laffer Cliff, a
tipping point, where Government revenue
from taxing cigarettes and tobacco is
suddenly vanishing.
Having taxed tobacco so highly, back-
tracking far enough to discourage illegal
sales is almost impossible. Duties would
have to drop so low that cigarettes would
cost £5 or £6 a packet, because that’s what
illegal product is selling for.
“The first item is actually to recognize
and realize,” says Patrick. “We need to
recognize that it has become a cliff rather
than a curve, it has gone too far. Then in
terms of actions to take, again, we have sent
quite a few documents and we’ve had quite a
few discussions on this, but it could be a
static policy, rather than rolling back. Are we
pricing tobacco so much that it’s going out
of the market? Should we hold excise at a
level, and then focus on stronger reinforce
ments of those products that are coming in
without any excise whatsoever? 38 per cent
of the market today is non-duty paid.”
True, and some people think it’s already
much higher, especially when one reads
frequently in the national press about the
rash of cash-only “barbershops” springing
up, which are suspected of laundering illicit
funds.
How can you turn back this tide?
“I think there is enough information for
the Government to act,” Patrick says. “It
really comes down to, will the Government
act? The industry continues to provide
evidence on where it’s happening and how
it’s happening, and I look at it as two areas.
One is what I call ‘into market’, and then
‘in-market’, right now.
“We have to stem it at both places. How is
[illicit product] coming into market? Where is
our border security? What are we doing? And
how do we bring that together? And then,
The government is also suffering
because we have proven, in many
ways, that it is not making the
necessary revenues that it once used
to, from tobacco
The retailer is
not a pseudo
policeman. The
retailer is there to
serve the
customers in the
community.