Another bad news for smokers: The Federal Government announced planned increases on smokes tax by 12.5 per cent each year for 4 years from December 1, 2013 to September 1, 2014, September 1, 2015 until September 1, 2016.

The increase will add at least $5.25 per 20-cigarrette pack starting December. As estimated, the tax will reach $5.3 billion.

Treasurer Chris Bowen explained the rationale behind the increase on smokes tax through an interview with ABC Newsradio.

"We look at things like the fact that last time tobacco tax was increased it appears to have reduced consumption of tobacco by about 11 per cent. We look at the views of health experts that say that this will be a substantial step in reducing the number of people smoking and particularly the number of young people taking up smoking," Mr Bowen explained.

The Federal Government said that the increase was also aimed to reduce the number of smokers in the country. According to statistics, there were over 15,000 Australians killed by smoking every year, and there were over 750,000 hospital bed days per year with patients suffering tobacco-related ailments.

"Of course it is a holistic measure. We do look at its impact on government revenue and we also look at the health impact," Mr Bowen added.

However, Shadow Treasurer Joe Hockey insisted that improving health policies was not the primary reason for the tax increase.

"It is solely about fixing the budget crisis... but ultimately who is going to pay? It is going to increase the cost of living for smokers but smokers could be pensioners, low-income people, it could be smokes and beers might be the thing that is important to them. I want to know what the impact is on lower income people of just increasing their cost of living."

In a separate interview with The Sunday Morning Herald, Mr Bowen emphasised that the tax increase will be used to fund cancer-related health services while promoting healthy living and improving the government's budget.

"I think the Australian people would agree that we need to consider all sorts of measures to reduce the impact of cancer caused by smoking," said Mr Bowen.

As much as the increase sounded promising and was even praised by different health groups, the British American Tobacco Australia had an opposing view - the increase on tax will give rise to the tobacco black market.

"The Australian Crime Commission said just two days ago that organised crime groups see illegal tobacco as a low risk high profit activity - they see it as a market where large profits can be made with minimal detection," Spokesman Scott Mclntyre explained.