KUALA LUMPUR (Oct 30): Malaysia's illegal cigarette trade reached a new all-time monthly high of 64.5% in August, according to the latest Illicit Cigarettes Study (ICS) by the Confederation of Malaysian Tobacco Manufacturers (CMTM). The previous record of 62% was set in July.
JT International Bhd (JTI Malaysia) managing director Cormac O'Rourke said the illicit cigarette trend for Malaysia, already the world's largest consumer of illegal cigarettes, points to a worsening illicit cigarette proliferation following the impact of Covid-19 lockdowns imposed since March, which continues to pressure the margins of legal tobacco companies and retailers here.
"There are certain quarters calling for a tax hike on tobacco products in the upcoming Budget 2021 (slated to be announced on Nov 6) but we must caution the government in the strongest possible manner not to impose any tax excise increase on tobacco products as it will only serve to worsen the situation and further damage legitimate retailers' businesses which are already under pressure," he told a virtual press conference today.
"An excise hike this year would widen the price gap between legal and illicit trade and will inflict damage on the legitimate industry and small and medium enterprises alike. There are some 60,000 retailers who derive up to 30% of their revenues from the selling of tobacco, not to mention government tax revenue," he added.
O'Rourke urged the government to fully operationalise the Multi Agency Task Force (MATF) as soon as possible to check the proliferation of illicit tobacco products in the country, which he said is costing the country some RM5 billion in lost revenues every year.
Chaired by the Ministry of Finance and led by the Royal Malaysian Customs Department, the MATF comprises policymakers, enforcement officers from various agencies, as well as relevant private-sector players. Its focus is specifically on cracking down on organised smuggling operations at the country's borders.
"JTI Malaysia, together with other industry players, has proposed that the government enhance enforcement efforts with strong policy measures that would combat smuggling activities for once and for all,” said O'Rourke.
He also called on the government to clamp down on transhipment foul play by imposing a ban on tobacco product transhipment and designating a single point of entry such as Port Klang and the Kuala Lumpur International Airport to support enforcement efforts better. "This transhipment loophole has been exploited for diverting duty-evaded tobacco products into the country with the false intent of moving the items to a neighbouring country."
Earlier, the ICS for August was conducted with 20,400 empty packs collected nationwide. The latest survey saw illicit cigarette consumption for Kuala Lumpur and Selangor surge to 66.5% and 65.7% in August, compared with 61% and 60% in July, respectively. Sabah and Sarawak had the highest numbers at 89% and 84% respectively.