The grocery giant has priced the “home brand style” packs of 25 cigarettes at around $11 almost $4 a pack less than Australian made Winfield and other leading brands.

They are believed to be the cheapest on the market since the federal Government raised cigarette taxes by 25 per cent in April.

The cigarettes are labelled “Made for Australia”. Only in smaller letters on the side of the packs does it reveal “Made in Germany”.

The packs carry unfamiliar names such as Bayside, Deal, Harvest and Tradition and are being promoted by Coles as a cheaper alternative to well known brands.

Coles began selling its discount line in November last year.

It refused to reveal how much money it was making out of the deal with its German manufacturer Von Eiken and Australian tobacco wholesaler Richland Express.

“Coles has introduced a small number of branded cigarette lines sourced from overseas, available exclusively in our stores,” a Coles spokesman said. He said the deal was established to offer more choice for customers, not to undermine the federal Government’s cigarette tax.

But a Coles employee, who did not want to be named, said she had been told to “push the overseas cigarettes” to customers struggling with higher prices after the tax rise.

“When customers come in and complain that their usual cigarettes are too expensive we suggest they try one of the new ones, like Tradition,” she said.

“I have been selling cigarettes for four years now. Lately I have noticed people just want the cheapest ones.”

The move, which positions Coles to profit when mandatory plain packaging of tobacco products is introduced in 2012, has outraged anti tobacco campaigners and health experts.

“It really underlines the need for the Government to introduce a floor price for cigarettes, which is a price you can’t go below,” University of Sydney Professor of Health Simon Chapman said.

Research from the Cancer Council of NSW shows 2.9 million Australians smoke on a daily basis. Cancer Council of NSW program manager Anita Dessaix said Coles was being “sneaky”.

“Smoking has been trending downward we really want to see tobacco control strategies heading in the right direction, and this is sneaky and disappointing,” she said.

Rival supermarket giants Woolworths and Franklins said they would not follow the example of Coles.

Richland Express spokesman Paul Daly said “I think this is the evolution of the industry and I think very soon all tobacco products will be manufactured overseas.”

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A.g. schneiderman sues major contraband cigarette dealers for evading state taxes

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NEW YORK Attorney General Eric T. Schneiderman announced today that his office has filed a lawsuit against two companies for illegally selling contraband cigarettes without paying the required state excise taxes. The lawsuit, which is the result of an ongoing investigation into contraband cigarette sales across the state, was filed in U.S. District Court for the Eastern District of New York against Grand River Enterprises based on Six Nations land in Ohsweken, Ontario and its wholesaler, Native Wholesale Supply, located in Perrysburg, New York.

The lawsuit charges that Grand River Enterprises avoided state taxes by illegally selling its products to Native Wholesale Supply instead of a New York State licensed stamping agent who would prepay the New York State cigarette excise tax and affix the state tax stamp, as required under the law. During the eight month period from November 2011 to July 2012, Native Wholesale Supply paid $85 million to Grand River Enterprises for its cigarettes, which accounts for more than three million cartons of cigarettes and a potential tax loss to the state of more than $13.2 million. Under federal law, Grand River Enterprises could face a civil penalty of up to two percent of the gross sales of cigarettes for the year. Based on 2011 2012 sales, the company’s civil penalty could be tens of millions of dollars.

“The illegal sale of contraband cigarettes violates both state and federal laws, robs New Yorkers of the funds to pay for essential state services, places legitimate businesses that play by the rules at a competitive disadvantage, and makes it easier for young people to take up a deadly habit, said Attorney General Schneiderman. My office is committed to taking action to stop the illegal sale of contraband cigarettes to protect our state s fiscal and physical health, and ensure all businesses in New York are playing by one set of rules.”

According to the complaint filed today in federal court, Grand River has sold and distributed its tobacco products in New York without shipping its cigarettes to a New York State licensed stamping agent who would pre pay the New York State cigarette excise tax and affix the state tax stamp, as required by state tax laws. Licensed stamping agents are the only entities in the State authorized by the New York Department of Taxation and Finance to affix a tax stamp and collect the excise tax due. On reservation cigarette sales to tribal members can be made tax free, but those cigarettes must nonetheless have the tax stamp affixed by a licensed stamping agent.

The lawsuit is the result of an ongoing investigation into contraband cigarette sales across the state. The lawsuit charges Grand River Enterprises and Native Wholesale Supply with selling illegal cigarettes in New York and is based on several incidents that establish the companies are selling and trafficking large quantities of illegal, untaxed cigarettes.

• On November 6, investigators from the Attorney General’s office purchased unstamped Grand River Seneca brand cigarettes from a smoke shop on the Poospatuck Reservation in Mastic on Long Island. The purchases came as investigators spotted over 50 cartons of Seneca brand cigarettes on display in the store.

• On January 16, 2013, as part of Attorney General Schneiderman’s investigation, ATF agents raided the Skydancer smoke shop in Seneca Falls where they seized, among other items, over 16,230 cartons of unstamped Seneca brand cigarettes. With 10 packs in each carton, and 20 cigarettes in each pack, ATF agents seized over 3 million contraband Seneca brand cigarettes at that one location.

The federal Contraband Cigarette Trafficking Act (CCTA) makes it unlawful to possess, sell or distribute over 50 cartons of untaxed cigarettes in a state, such as New York, that requires tax stamps and tax collection. Defendants also violated the federal Prevent All Cigarette Trafficking (PACT) Act and New York State tax and public health laws by not reporting these sales to the Department of Taxation and Finance, as required.

In December of 2012 Attorney General Schneiderman filed a lawsuit against King Mountain Tobacco Company for selling hundreds of thousands of its cigarettes in New York each year without paying the required state excise tax.

The matter is being litigated by Tobacco Compliance Bureau Assistant Attorney General Sarah Evans under the supervision of Tobacco Compliance Bureau Chief Dana Biberman and First Deputy of Affirmative Litigation Janet Sabel.