THE Malaysian economy is still reeling from the ongoing uncertainties surrounding the COVID-19 pandemic, possibility of commodity shocks and potential problems relating to vaccine roll-out.
In addition, Malaysia’s household debt-to-GDP (gross development product) ratio has surged to new peak of 93.3% while the federal government’s debt has increased to 62.2% of the nation’s nominal gross domestic product (GDP) as of end-December 2020 from 52.5% a year ago.
Thus, the Malaysian Government must remain vigilant in broadening its revenue base by regulating and taxing untapped novel industries such as the multi-billion ringgit local vape sector in order to safeguard economic recovery, according to investment and economic analyst Pankaj Kumar.
“We have a dire need to explore new revenue sources or untapped industries like the Malaysian vape sector which provides an opportune avenue to contribute exponentially towards economic growth,” Pankaj pointed out.
Pankaj’s comments came following the release of Bank Negara Malaysia’s (BNM) Economic and Monetary Review 2020 report on March 31: “While the central bank has projected domestic economic rebound of between 6% and 7.5% in 2021 as compared to a 5.6% contraction last year we are still not out of the woods yet.”
According to Pankaj, the vape sector drew his attention following a new study conducted by Grand View Research Inc that projected the global vape market size to reach US$67.31 bil (RM279.10 bil) by 2027, thus registering a revenue-based compound annual growth rate, or (CAGR) of 23.8% from 2020 to 2027.
“In tandem, the Malaysian vape industry has also grown to RM2.27 bill in value with some 3,300 related businesses that employ some 15,000 personnel with a potential RM300 mil revenue gain for the Government if the taxation is broadened to include nicotine vaping e-liquids,” he commented, citing a report published by the Malaysian Vape Chamber of Commerce (MVCC) in February 2021.
“Studies have also shown that vaping has less harmful impact compared to tobacco products such as cigarettes and this a key factor in the boom for this industry globally.”
Despite the Government’s move to impose excise duties on vape devices and products starting from Jan 1, however, it only covers non-nicotine-based products, which is a very small fraction of the market.
“It is critical that comprehensive regulations and practical taxation policies that cover the entire vape sector, including nicotine vaping products, be put in place quickly in order to allow the Malaysian vape sector to contribute to tax revenue, bolster employment and potentially spur foreign direct investments,” Pankaj concluded. – April 2, 2021