Stay the course to achieve sustainable progress against cigarette smuggling

THE incidence of illicit cigarettes saw a 6.2 percentage point dip in May 2021, down to 57.9%, from 64.1% in December 2020, marking the first time that the incidence of illicit cigarettes has decreased in the past six years.

This is according to the latest Illicit Cigarettes Study (ICS) commissioned by the Confederation of Malaysian Tobacco Manufacturers (CMTM).

“The reduced incidence of illicit cigarettes is an early sign of improvement that can be attributed to policies announced by the Minister of Finance during Budget 2021,” said Japan Tobacco International (Malaysia) managing director Khoo Bee Leng.

These include halting the issuance of new import licences, tightening the renewal of import licences, limiting transhipment of cigarettes to five dedicated ports and imposing tax on the import of cigarettes with drawback facilities for re-export.

“It is imperative that the Government remain steadfast in its policies when facing opposition by parties with vested interests to have those policies revoked,” Khoo elaborated.

In 2015, the Government raised the tax on cigarettes, leading to a 43% increase in the incidence of illicit cigarettes.

Since then, the incidence of illicit cigarettes in Malaysia has stood at over 50%, increasing every single year to the highest level of 64.1% in December 2020.

The first-time reduction in the incidence of illicit cigarettes should not be viewed as an opportunity to increase excise tax on cigarettes.

Any widening of the price gap between legal cigarettes and illicit cigarettes, such as by a tax hike, will reverse the progress made in the first half of 2021.

“It is important to note that the Government’s overall revenue will automatically improve along with any recovery of legal tobacco industry volumes. This is a win-win situation for both parties and consequently for the nation too,” Khoo opined.

According to Khoo, transshipment loopholes used to be the primary method for illegal cigarette smuggling, but the new restrictions in place has forced smugglers to resort to mid-ocean off-loading, barter and fishing boats, private jetties and unofficial landing spots throughout the country’s coast instead.

Therefore, the multi-agency approach taken by the Government involving various ministries and agencies, should reconvene in efforts to act against new, emerging threats while maintaining and streamlining the existing transshipment policy.

“Stepping up efforts on seizures and enforcement is key to fortifying the borders and entry points,” Khoo concluded. – July 21, 2021.


Photo credit: South China Morning Post

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