No prosecutions for illegal cigarette sales in dairies despite 8.3 million seized in four months

New Zealand has seized 8.3 million illicit cigarettes worth $17.2 million in just four months, yet authorities have failed to prosecute a single case involving the illegal sale of untaxed tobacco packaging—a loophole that continues to fuel the black market. While customs and police crack down on smuggling operations, the absence of penalties for selling loose cigarettes in convenience stores and dairies has left the underground market thriving, according to government and law enforcement sources.

Official data shows that while customs seizures have surged 40% year-on-year, prosecutions for the sale of illegal tobacco packaging—where most illicit cigarettes are sold—have remained at zero for the past 12 months. Industry experts warn this gap is costing the government tens of millions in lost tax revenue annually while undermining efforts to reduce youth smoking.

With a government paper set to be presented to Cabinet this month outlining new measures to tackle the illicit tobacco trade, the question remains: Why has enforcement stalled at the retail level, and what will it take to finally close this gap?

Why are illegal cigarettes still being sold in dairies despite record seizures?

The disconnect between seizures and prosecutions stems from a legal ambiguity in how untaxed tobacco is sold. While customs and police focus on intercepting large-scale smuggling operations, smaller retailers—including many dairies—continue to sell loose cigarettes without proper packaging, a practice that technically violates tobacco control laws but has proven difficult to enforce.

According to a 2023 report from the Ministry of Health, nearly 60% of illicit cigarettes in New Zealand are sold in this manner, often in small packs or single sticks. The issue is compounded by the fact that many retailers argue they are unaware of the legal requirements around tobacco packaging, while consumers—particularly younger smokers—prefer the lower cost of untaxed products.

Customs data reveals that between January and April 2024, authorities intercepted 8.3 million cigarettes worth an estimated $17.2 million at the border, a figure that represents a sharp increase from the same period last year. However, enforcement at the retail level has remained stagnant.

Key figures:

• 8.3 million cigarettes seized in four months (up 40% YoY)
• $17.2 million estimated market value of seized stock
• 0 prosecutions for illegal tobacco packaging sales in 12 months
• 60% of illicit cigarettes sold loose, without proper packaging

Who is responsible for enforcing the law—and why aren’t they?

The primary responsibility for prosecuting illegal tobacco sales falls to regional councils and the Ministry of Health, which oversee compliance with the Smokefree Environments and Regulated Products (Smoked Tobacco) Act 2022. However, sources indicate that understaffing and resource constraints have limited proactive enforcement efforts.

A spokesperson for the Ministry of Health confirmed that while the agency has increased compliance checks in recent months, only three retailers have been issued formal warnings for selling untaxed tobacco since January 2023. The ministry attributes the delay to a backlog in case preparation, where investigations often require multiple visits to establish a pattern of non-compliance before legal action can be taken.

Meanwhile, customs officials have shifted focus to interdicting large shipments rather than pursuing smaller-scale sellers, arguing that the majority of illicit tobacco enters the country through organized crime networks rather than individual retailers. However, industry analysts contend that without addressing the retail end of the market, smugglers will continue to find willing buyers.

Stakeholder perspectives:

• Ministry of Health: “Enforcement is a priority, but we are constrained by available resources. We are working to streamline the process for prosecutions.”
• Customs New Zealand: “Our focus remains on disrupting large-scale smuggling operations, which account for the bulk of illicit tobacco entering the country.”
• Convenience Store Association: “Many retailers are unaware of the legal requirements. Education and support are needed before enforcement can be effective.”

How does the black market operate—and who benefits?

The illicit tobacco trade in New Zealand operates on two main levels: large-scale smuggling and retail-level sales. While customs seizures target the former, the latter—where cigarettes are sold loose in dairies, petrol stations, and corner shops—remains largely unchecked.

According to a 2023 study by the University of Otago, the average price of a pack of illicit cigarettes in New Zealand is $10–$15, compared to $25–$30 for legal, taxed products. This price gap has made untaxed tobacco particularly appealing to younger smokers and low-income households, who account for a disproportionate share of the black market.

Organized crime groups are the primary beneficiaries, with revenue estimates ranging from $50 million to $100 million annually from illicit tobacco sales. However, smaller retailers—often unknowingly—also play a role by providing a last-mile distribution network that keeps untaxed cigarettes in circulation.

How the black market works:

• Smuggling: Large shipments enter via maritime or air freight, often misdeclared as legal goods.
• Wholesale distribution: Smuggled stock is broken down into smaller batches for retail sale.
• Retail sales: Dairies and convenience stores sell loose cigarettes, often without proper packaging or tax stamps.
• Consumer purchase: Buyers, particularly younger smokers, prefer the lower cost of illicit products.

What are the consequences of inaction—and what could change?

The failure to prosecute illegal tobacco sales has three major consequences: lost tax revenue, increased youth smoking, and the continued funding of organized crime.

New Zealand loses an estimated $100–$150 million annually in tobacco excise tax due to illicit sales, money that could otherwise fund public health initiatives. Additionally, young smokers are 40% more likely to purchase untaxed cigarettes, undermining government efforts to reduce smoking rates among minors.

In response, Associate Health Minister Casey Costello has indicated that a new Cabinet paper will be presented this month outlining tougher enforcement measures, including:

• Mandatory retailer training on tobacco laws
• Increased fines for repeat offenders
• Stronger collaboration between customs, police, and regional councils
• Potential legislation to ban the sale of loose cigarettes without proper packaging

However, industry experts warn that without additional funding for enforcement agencies, these measures may struggle to make a meaningful impact. A 2023 audit by the Office of the Auditor-General found that only 12% of regional councils have dedicated staff to monitor tobacco compliance, leaving gaps in oversight.

Potential solutions under consideration:

• Legislative changes: Banning the sale of loose cigarettes without tax stamps.
• Retailer education: Compulsory training programs to ensure compliance.
• Enhanced penalties: Higher fines and potential license suspensions for repeat offenders.
• Technology upgrades: Investing in real-time tracking of tobacco shipments.

What happens next—and what can consumers do?

The next few months will be critical in determining whether New Zealand can finally close the gap between seizures and prosecutions. With the Cabinet paper expected to be finalized by mid-2024, lawmakers will need to decide on the most effective approach—whether through stricter enforcement, legislative changes, or a combination of both.

In the meantime, consumers concerned about supporting the illicit trade can take steps to identify and avoid untaxed cigarettes:

• Look for tax stamps on packaging—legal cigarettes must display these.
• Avoid purchasing loose cigarettes without proper branding.
• Report suspicious sales to local council enforcement teams or customs.
• Support licensed retailers who comply with tobacco laws.

While the government works to tighten regulations, the onus is also on retailers to self-regulate and ensure they are not inadvertently contributing to the black market. With prosecutions remaining at zero, the question of who will finally be held accountable hangs in the balance.

Frequently asked questions about illegal cigarette sales in New Zealand

Q: Are illegal cigarettes safe to smoke?
higher levels of toxic chemicals due to poor manufacturing standards. Health authorities warn that they pose greater health risks than regulated products.

Q: Why do dairies sell illegal cigarettes if it’s against the law?
unaware of the legal requirements or believe the risk of prosecution is low. Others may prioritize sales over compliance, particularly in areas with high demand for untaxed tobacco.

Q: How much money does the government lose due to illicit tobacco sales?
$100–$150 million annually in tobacco excise tax because of the black market, funds that could otherwise support public health programs.

Q: What are the penalties for selling illegal cigarettes?
fines of up to $50,000 and potential license suspensions. However, prosecutions remain rare due to enforcement challenges.

Q: Can I get in trouble for buying illegal cigarettes?
knowingly buying from a retailer selling untaxed products may contribute to their non-compliance. Authorities encourage consumers to report suspicious sales.

Q: What is the government doing to stop the illicit tobacco trade?
Cabinet paper with new enforcement measures, including mandatory retailer training, higher fines, and potential legislation to ban loose cigarette sales without tax stamps. Additional funding for enforcement agencies is also under consideration.