Sustained action against tobacco black market critical to recovery

BRITISH American Tobacco (M) Bhd has expressed concern that Malaysia’s tobacco black market problem is far from being resolved even as 2H 2021 is fast approaching.

In fact, the company’s managing director Jonathan Reed expects the levels of illegal cigarettes in Malaysia to remain high as many consumers will be facing financial pressures due to the COVID-19 pandemic and can ill-afford to buy legal cigarettes.

“The range of measures announced in Budget 2021 to curtail the tobacco black market is a good start,” he pointed out at the conclusion of the company’s 60th annual general meeting (AGM) today.

“However, the Government must remain focused on its efforts to stop the black market to fund economic recovery.”

Concerns have been raised that the market share of illicit cigarettes sold in Malaysia may rise to 70% of total sales by end-2021 as consumers struggle with the economic fallout of the COVID-19 pandemic

As it is, the share of contraband cigarettes in the country is already the highest in the world at 62.3% of total sales last year – an increase from the 58.9% recorded in 2018.

Reed further noted that it is critical that the Malaysian Government expands the tax framework for vape products to include vape e-liquids with nicotine which makes up 97% of the market so as to enable consumers to access alternative products of known quality.

“We will continue to support and encourage clear and practical regulations in relation to nicotine vaping by the Malaysian Government,” he added.

Under Budget 2021, the Government will impose excise duty at a rate of 10% ad valorem on all types of electronic and non-electronic cigarette devices including vape effective January 1.

Commenting on its financial performance, Reed said FY2020 was a turnaround year for BAT Malaysia despite the difficult operating conditions.

“Our volume, profit, net turnover and share all grew in the three closing quarters of the year, providing us with a great platform to go back to growth and build ‘A Better Tomorrow’,” he noted.

“While combustible tobacco will be at the core of our business for some time to come, we aim to generate an increasingly greater proportion of our revenues from products other than cigarettes, thereby reducing the health impact of our business.” – April 2021.

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