Illicit cigarettes trade to jump in light of Malaysia’s border re-opening

THE latest Illicit Cigarettes Study (ICS) in Malaysia (March 2022) by Nielsen, an international market research company, revealed that illicit cigarette incidence had hit 58.4% in March 2022 against 54.6% recorded for December 2021.

While the Confederation of Malaysian Tobacco Manufacturers (CMTM) applauds the Government for introducing tough measures during the 2021 National Budget such as the limitation of transshipment and re-export of cigarettes, smuggling syndicates have shifted their modus operandi to coastal areas to circumvent these measures.

To re-cap, counter-measures by the Malaysian authorities has led to an initial reduction of the prevalence of illicit cigarettes from a record high of 63.8%.

Nevertheless, the demand for illicit cigarettes continues to be driven by its affordability. The Government is expected to lose even more in terms of uncollected tax revenue this year due to the high level of illicit cigarette trade, according to a CMTM spokesperson.

“CMTM expects the illicit cigarettes trade to expand even further in light of the re-opening of the Malaysian borders and the resumption of international travel,” projected the spokesperson.

“The Government should intensify its enforcement efforts at the entry points along Malaysian borders, especially in the coastal areas.”

In this regard, the Finance Ministry-led Multi-Agency Task Force should dedicate a task force comprising relevant enforcement agencies such as the Malaysian Maritime Enforcement Agency, Marine Police, Customs as well as the Navy to patrol along the coastal hotspots to prevent any smuggling activities.

Additionally, the Government should also consider imposing stricter laws through amending the Security Offences (Special Measures) Act 2012 (SOSMA); the Prevention of Crime Act 1959 (POCA); and the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA) which will authorise and empower enforcement agencies with wider investigative powers to deal with the complex structure of smuggling syndicates effectively.

“At the same time, the anti-illicit cigarettes trade measures that are already in place since 2021 must be maintained and effectively enforced, coupled with the moratorium on tobacco excise rate, to arrest the demand of the black market,” opined the spokesperson.

“CMTM also calls for a sustained close collaboration between the industry and the Government to address the illicit cigarette problem through the Multi-Agency Task Force.”

Lastly, CMTM strongly believes that the Government should prioritise its efforts to lower the illicit cigarette prevalence in the country before considering new policies like the generation end game, plain packaging and retail display ban which will cause unintended consequences, including the exponential increase of illicit cigarettes in the market. – May 23, 2022

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