HALVING tobacco taxes will help curb the black market and reduce leakages from unpaid levies, said the Retail and Trade Brands Advocacy Malaysia chapter (RTBA Malaysia).
“We agree with Pontian MP Datuk Seri Ahmad Maslan’s suggestion to slash tobacco prices by half to deal a blow to the black market.
“It’s a bold move by the Government to address the tobacco black market in Budget 2021.
“Several initiatives including strengthening the multiagency task force (MATF) with the participation of Malaysian Anti-Corruption Commission (MACC) and National Financial Crime Centre, as well as announcing restrictions on cigarette transhipment activities will help address the supply chain route for the tobacco black market to a certain extent,” said its president Datuk Fazli Nordin, in a statement.
Recently, Ahmad Maslan told the Dewan Rakyat that the Government should consider slashing tobacco taxes by half to curb the appeal of contraband cigarettes.
The former Deputy Finance Minister suggested that the Government conduct a two-year pilot programme to allow tobacco companies to sell legal cigarettes at RM8 per pack, which is closer to the price of a pack of illicit cigarettes.
Ahmad Maslan pointed out that Malaysia has the largest “black market” for tobacco globally, accounting for 64% of the market share.
Cigarettes often go missing in Malaysia during the transhipment process before they get re-exported to another country. Therefore, Malaysia loses about RM5 bil in tobacco tax revenue yearly.
Local, international study proves it
Fazli said that the main reason why contraband cigarettes thrive in Malaysia was due to the wide price gap between the legal and illegal ones.
He also said that there are local and international studies that support the argument on the pricing problem, which allows contraband cigarettes to thrive.
“KPMG’s annual ‘Illicit Tobacco in Australia’ report revealed that Australia’s illegal tobacco had increased significantly from 14% of the market in 2018 to over 20% in 2019, following a 12.5% ad hoc excise increase in May 2016.
“A recent report by the Australian Parliamentary Joint Committee on Illicit Tobacco Market has acknowledged that Australia’s price-based policies to control tobacco have been counter-productive.
“The Parliamentary Joint Committee report also revealed that in 2018 and 2019, a total of 633 tonnes of illicit tobacco were seized, which set a new record,” he said.
On the local front, Fazli said RTBA’s own study in April, entitled “Illicit Tobacco in the Asia-Pacific Region: Causes and Solutions” showed that the sales of illegal cigarettes in Malaysia rose from 37% in 2015 to 65% this year.
He added the spike came following a substantial excise hike on legal products in 2015.
“Clearly, the numbers speak for themselves. As such, Ahmad Maslan is spot on in identifying excise reforms as a solution that can complement the enforcement initiatives put in place in Budget 2021, to tackle the tobacco black market in a comprehensive manner,” Fazli opined. – Dec 24, 2020.
