South-west Victoria is being flooded with illegal tobacco, part of a black "chop- chop" market that is costing the Australian economy up to $2 billion a year, according to experts.
The Standard can reveal boxes of 100 cigarettes are available for just $40 from retailers in Warrnambool, Portland, Hamilton and Colac.
Those boxes represented more than $80 in lost excise per box, according to the founder of the Australian Border Force's tobacco strike team, Rohan Pike.
Illegal tobacco known as "chop-chop" is kept under the counter in four outlets The Standard is aware of.
If you ask for cheap cigarettes they offer a choice between a red box, which is "very strong", a blue box, which is medium strength and finally silver, which is the "light" option.
The red and blue options contain "chop-chop" that has been re-packaged into tailored cigarettes and sold in Ventti filter boxes, with all payments to be made in cash.
The silver box contains Gizeh brand carbon filter cigarettes made in Germany and imported in their original packaging.
Most of the stores also sold menthol options, but The Standard was informed the silver box was the most popular, followed by blue and then red.
Illicit tobacco trade real cost
The sale of tobacco in such form contravenes a range of legislation relating to plain packaging requirements, customs duty, health warning labelling on tobacco products and potentially reduced fire risk cigarette papers.
But Mr Pike, who served as an officer in the Australian Federal Police for more than 20 years, said the biggest issue for the federal government was the loss of excise.
A report published in June by leading accounting firm KPMG found 2100 tonnes of tobacco was purchased illegally in Australia during the last year, which represented $2.02 billion in lost excise.
Mr Pike's own study, as submitted and accepted by the Black Economy Taskforce, calculated the excise loss at $3.82 billion.
An Australian Border Force spokeswoman said the government agency had detected about 394 tonnes of undeclared tobacco during the 2018-19 financial year as at the end of February, which would represent more than $411 million in lost excise.
Mr Pike said both smoking and non-smoking residents of Warrnambool, Portland, Colac and Hamilton should be concerned.
"It's not an isolated shop there in Warrnambool," he said.
Australian Tax Office assistant commissioner Peter Vujanic,in April said the illegal tobacco trade was "lucrative".
"Engaging in the illicit tobacco trade is not victimless," he said.
"It significantly deprives the community of taxes that are required to fund essential community services such as roads, school and hospitals."
The Standard spoke directly to a Warrnambool outlet but the salesperson denied any knowledge of 'chop chop' being sold at the premises.
Where does the buck stop at the federal level?
The ABF is responsible for enforcing border related elements of the illicit tobacco market.
Post-border within Australia, the responsibility for the illicit tobacco market is split across a range of agencies.
The Department of Health is responsible for enforcing plain packaging requirements, and has the Commonwealth lead for tobacco issues more broadly.
The Australian Competition and Consumer Commission is responsible for product safety standards.
The Australian Tax Office is responsible for domestic crops and licencing matters related to the production of tobacco in Australia.
States and territories, including their respective health and law enforcement agencies (police), are responsible for tobacco sold at the retail level in their jurisdictions, including illicit tobacco retailers.
What is the situation at the local level?
Under section 36 of the Tobacco Act 1987 (Victoria) local councils are authorised to obtain a search warrant from a magistrate to enter premises, by force if necessary, and seize any illegally imported tobacco they can find.
The Standard informed Warrnambool City Council of the Warrnambool operation in December last year.
Warrnambool City Council manager of city amenity Glenn Reddick said the matter was then reported to Warrnambool police.
But Mr Reddick said the council itself would not enter the premises to seize illegal products.
Similarly, a Glenelg Shire Council spokeswoman said the Portland operation was a matter for the police.
She said enforcement regarding black market tobacco was undertaken by the Tobacco Control Unit at the Department of Health and Human Services, which would refer the matter to the ATO for follow-up action.
"Council officers, under guidance from DHHS, are advised not to undertake investigation of illicit tobacco complaints without first seeking assistance from DHHS," she said.
Mr Pike said this reflected a widespread problem across Victoria.
"I understand the difficulties for local councils, who aren't really set up or resourced to conduct enforcement action," he said.
"But given there has been millions of federal dollars spent setting up an illicit tobacco taskforce, you would think that councils, in collaboration with Victoria Police in the regional areas, would be obliged to protect their communities.
"Unfortunately, state agencies are hamstrung by a lack of appropriate legislation to deal with the crime at the retail level."
Warrnambool police Senior Sergeant Chris Asenjo said he was aware of the Warrnambool operation.
"We believe a lot of that illegal tobacco is sourced through Melbourne from crime groups within metropolitan Melbourne," he said.
"I'm not saying definitively that any of those stores are linked to organised crime, but it would not be uncommon for criminal enterprises to make contact with these businesses.
"Wherever you have goods for sale that are heavily taxed and/or expensive, or that people may have become addicted to, for example tobacco or alcohol, then there is always an opportunity for organised crime to be involved."
But Senior Sergeant Asenjo said Victoria Police also faced difficulties in the fight against illicit tobacco.
"When it comes to tobacco jobs, to be frank, at times we don't have the resources to allocate to that," he said.
"We would like to see a little more of a collegiate approach with our other government agencies, but we're all busy trying to do what we can.
"You need quite a bit of evidence to get a search warrant issued by a court and we're not in the business of putting up affidavits to the magistrates court that are going to get knocked back.
"Rest assured though, we act on all our information."
What recent legislation has come into play?
An ABF spokeswoman said the Department of Home Affairs worked with Treasury and the ATO to implement legislative changes that strengthened illicit tobacco offences and penalties.
Federal Parliament passed the Customs Amendment (Illicit Tobacco Offences) Act 2018 on August 23 last year.
The amendment extends investigation and enforcement powers of ABF officers to 'reasonable suspicion' offences contained in the Taxation Administration Act 1953.
ABF officers can now seize illicit tobacco with a warrant, whether imported or domestically produced, where there is a reasonable suspicion that taxes or duty have not been paid.
The amendment introduced new tobacco smuggling and possession offences, lowering the burden of proof, where the fault element is 'recklessness' rather than 'intention' or 'knowledge".
Federal Member for Wannon Dan Tehan was contacted by The Standard about the south-west's illegal tobacco stores but referred The Standard to the ABF.
State Member for South West Coast Roma Britnell said she had heard of "chop-chop" being sold locally.
"We need regulation, and while there's always unintended consequences we get frustrated with, this is an example of regulation that has been here for many years with good reason," she said.