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At first glance, Simon Chapman's submission acknowledges something important: cheap illicit tobacco is now widespread, highly accessible, and eroding the price barrier that once discouraged smoking. But rather than follow that logic to its obvious conclusion that extreme taxation has created the conditions for this market, he instead bends over backwards to deny the role price plays in driving it.
This is the central contradiction in his argument.
Chapman repeatedly states that price is a “universally acknowledged” driver of smoking behaviour. Yet when that same principle applies to illicit markets where a $7 pack competes against a $40–$60 legal product, he suddenly dismisses price as irrelevant. You can’t have it both ways. If price reduces consumption, then extreme price gaps will inevitably redirect consumption. That’s not ideology, that’s basic economics.
His attempt to argue that illicit trade exists everywhere, regardless of tax levels, is another sleight of hand. Of course, illicit markets exist globally, but the scale, visibility, and violence attached to Australia’s market are what make it exceptional. Open, shopfront sales. Delivery services advertised on trees and social media. Firebombings. Turf wars. That’s not business-as-usual, it’s a market supercharged by unprecedented margins.
And this is where Chapman’s dismissal of James Martin becomes particularly telling.
Martin’s work doesn’t rely on rhetoric - it reflects well-established criminological principles: when profit margins are extreme, organised crime will enter and expand. Australia has effectively engineered one of the most lucrative black markets in the world through policy settings that pushed legal prices far beyond what enforcement alone can control. Ignoring that doesn’t make it untrue, it just avoids the uncomfortable implication that policy has backfired.
Chapman’s arithmetic argument that even large tax cuts wouldn’t undercut illicit prices is also overly simplistic. Illicit markets don’t operate in a vacuum. They respond to risk, enforcement pressure, and margins. Narrow the gap, and you reduce the incentive structure. Leave a 500–800% margin in place, and no amount of policing will keep pace.
Perhaps most concerning is his continued defence of the pharmacy-only vape model. In theory, it mirrors tightly controlled systems like pharmaceuticals. In reality, it has failed. Consumers didn’t migrate to pharmacies; they migrated to the black market. The result? Less regulated access, not more. More illicit supply, not less. And, increasingly, evidence that some users are shifting back to smoking as legal alternatives become harder to access.
Instead of acknowledging this, Chapman frames the issue almost entirely as a failure of enforcement and compliance. But enforcement cannot overcome economics at this scale. When the reward is enormous, and the risk historically has been low, criminal participation isn’t an anomaly. It’s predictable.
There’s also a broader tone throughout the submission that’s hard to ignore. Critics are caricatured as “economically illiterate” or industry-aligned, rather than engaged with seriously. That might work rhetorically, but it doesn’t address the substance of the argument. And increasingly, that argument is being made not just by commentators, but by criminologists, economists, and even policymakers who are starting to acknowledge that the current approach is unsustainable.
In the end, Chapman is right about one thing: Australia is facing a serious illicit tobacco crisis.
But his refusal to recognise the role that extreme pricing and restrictive policy settings have played in creating that crisis means his proposed solutions are more enforcement, harsher penalties, and tighter controls, which risk doubling down on the very conditions that allowed it to emerge in the first place.
When policy creates a market this profitable, ignoring the economic drivers doesn’t solve the problem.
It entrenches it.
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