Govt urged to suspend tax on cigarettes for 3 years to deal with contrabands

03 Apr 2019 / 14:30 H.

PETALING JAYA: The government has been urged to suspend tax on cigarettes for the next three years to deal with the sale of contrabands in the country.

JT International Bhd (JTI Malaysia) managing director Cormac O’Rourke said the illegal cigarettes sale in Malaysia reached a new high of 58.9% last year, according to the 2018 Illicit Cigarette Study (ICS). He said the figure represents approximately 12 billion sticks, an increase of 3.3% from 2017.

“Malaysia is, regrettably, one of the few countries in the world where illegal cigarette sales continue to thrive unabated with the situation now surpassing crisis levels,” O’Rourke said in a press conference at the tobacco company’s headquarters here today.

He said the growth in sale of illicit cigarettes was due to the excessive increases in tobacco excise duties and cigarette prices over the years, as well as insufficient enforcement in detecting and fighting the sale of contrabands.

The 2018 ICS was based on a total of 153,000 discarded cigarette packs collected from the streets and rubbish bins across the country throughout the year. Of the illegal cigarette packs, 91% did not have tax stamps while the remaining bore fake tax stamps.

The study found the sale of illegal cigarette sales most widespread in Sabah, Sarawak, Pahang, Kelantan and Terengganu, with between 70% and 80% of cigarette packs from these areas being of illegal cigarettes.

O’Rourke said the results also highlighted a worrying increase in smuggled cigarettes with fake tax stamps.

He said under the law, tobacco companies must increase cigarette prices by the same time as the excise duty increase. This means that tobacco companies cannot absorb excise duty hikes.

“Illegal cigarette sale has caused the country to lose up to RM5 billion in uncollected tax revenues and these losses look set to continue,” he said.

“(This is) despite the commitment made by Ministry of Finance Lim Guan Eng in his Budget 2019 speech last year to recoup RM1 billion from addressing illegal cigarette sales.”

O’Rourke called for an excise moratorium for the next three years to prevent the price shocks which lead smokers to purchase illegal cigarettes.

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