Big gain for Malaysian economy by regulating the vape industry

RECENT reports have confirmed what a lot of people already know: that the vape industry has significant potential to contribute to the Malaysian economy.

This is thanks to its capabilities of able to create jobs and develop existing small and medium enterprises (SMEs) within the industry while attracting both local and foreign investments.

According to a survey by the Malaysian Vape Industry Advocacy, 80% of Malaysians want the Government to take more action to regulate the vaping industry in Malaysia.

Rizani Zakaria

The poll also showed that 87% of Malaysians agreed that tax should be imposed on vaping products, while 74% think that revenue collected from vape products could be spent on areas of importance such as education and economy.

“The implementation of excise tax on vape products since earlier this year is a step in the right direction towards regulating the industry,” Malaysian Vape Industry Advocacy president Rizani Zakaria told FocusM.

“However, the current excise taxation structure does not include vape e-liquid containing nicotine which makes up the majority of the local market. This inevitably means that revenue collection will not be maximised, and the implementation of excise duties will be ineffective.”

Rizani further suggests that the Government should expand the tax structure to include vape e-liquid containing nicotine and introduce clear regulations for this product.

“That way, the Government can maximise revenue collection and at the same time ensure consumers are using regulated products in Malaysia.”

A lucrative industry

Regulation will also allow the in-flow of foreign direct investments (FDIs) as the vaping industry is itself an established ecosystem that global investors and multinational companies will find appealing, according to the Malaysian Vape Chamber of Commerce (MVCC) head of information Ashraf Rozali.

Ashraf Rozali

“MVCC strongly believes that the vape industry in Malaysia is too substantial to remain unregulated. We urge the Government to immediately introduce appropriate regulations to create a positive multiplier effect to the Malaysian economy,” he told FocusM.

Based on MVCC’s data, Razali revealed that there are currently 3,300 businesses directly related to the vape industry with a workforce of more than 15,000 workers..

“Our study further estimated that workers in the vape industry were paid up to RM450 mil in wages in total in 2019 alone. Clearly the vape industry has facilitated the growth of local entrepreneurs, many of which are local and Bumiputera businesses,” he justified.

“With proper regulations, local entrepreneurs will have the capacity, bandwidth and the support needed to expand their footprint.”

Huge tax potential

Meanwhile, the Vape Consumers Association of Malaysia (VCAM) is in favour of legalising and regulating the nicotine vape industry which will unlock a much-needed tax revenue stream for the country which is crucial during the pandemic.

With an estimated value of RM2.27 bil, the vape industry in Malaysia is too substantial to remain unregulated, and it is in the best interest of the nation to quickly roll our proper regulations to benefit the Malaysian economy, according to VCAM president Tengku Aslahuddin Ja’afar Tengku Azlan.

Tengku Aslahuddin Ja’afar Tengku Azlan.

“Currently, the Government has imposed a 10% excise duty on all cigarette products, both electronic and non-electronic. In addition, vape liquids will also be imposed excise duty of 40 sen per millilitre,” he explained.

“However, the taxation framework only covers vape devices and non-nicotine vape e-liquids which make up a small margin of the overall vape market.”

Tengku Aslahuddin also reckoned that implementing a comprehensive tax structure for the industry serves not only to generate additional revenue for the Government but also to professionalise the industry and encourage research and increased investments.

“Local and international vape companies stand to benefit from a more structured approach, and the Government has a potential revenue of more than RM300 mil if they introduce a more comprehensive set of regulations,” he added.

Furthermore, the introduction of regulatory laws would also allow businesses to have a better overview of the vape products being sold.

By ensuring proper minimum standards, for instance, consumer interest will be protected through products obtained from legitimate supply chains that uphold proper quality standards while being able to clamp down more effectively on contraband and counterfeit products.

“Right now, consumers buying nicotine vapes have no choice but to purchase from the black market and the risks are real,” added Tengku Aslahuddin. – July 13, 2021.

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