The first step to tackle tobacco black market has begun

BRITISH American Tobacco (M) Bhd today commended the Government for initiating bold steps under Budget 2021 to combat the tobacco black market.

The tobacco giant sees measures announced under the Budget as the first step to disrupting the supply of illegal cigarettes in Malaysia.

Among the measures mooted under Budget 2021 are as follows:

  • The Multi-Agency Task Force will be empowered by the inclusion of the Malaysia Anti-Corruption Commission (MACC) and National Anti-Financial Crime Centre to battle smuggling of high duty items.
  • Beginning January 2021, no more new cigarette import licences will be issued. Such licence renewals will also be tightened and the conditions revised, including imposing import quotas.
  • The transhipment of cigarette exports will be limited to selected ports. Taxes will be imposed on drawbacks on all imported cigarettes for the purpose of transhipment and re-export.
  • The government will also not allow transhipment activities and re-exports of cigarettes using pump boats.
  • Taxes will be imposed on cigarettes and tobacco products at all duty-free islands.
  • Excise duty at an ad valorem rate of 10% on all types of electronic cigarette devices and non-electronic devices, including vaping products.
  • Electronic cigarette liquids will also be subjected to an excise duty at a rate of 40 sen per millilitre.

BAT Malaysia noted that the measures announced by the Government is both timely and necessary as Malaysia is currently No. 1 in the world for illegal cigarettes which make up 65% of the total market share.

“High taxes on legitimate cigarettes have created a huge demand for cheap, illegal cigarettes,” the company’s managing director Jonathan Reed pointed out in a media release.

“The tobacco black market not only causes the loss of billions of ringgit in uncollected tax, it also funds crime, fuels corruption and drives the youth smoking rate.”

Moving forward, Reed proposed that measures to enhance enforcement must be accompanied by excise reforms to really make an impact on the tobacco black market.

“The price gap between legal and illegal products is currently far too wide, creating a situation that enforcement alone cannot address,” he observed.

“Ultimately, we believe Malaysian consumers want to do the right thing. If given a viable opportunity to choose a legal alternative at a reasonable price, most would prefer not to put money in the hands of criminals.” – Nov 6, 2020

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