This article has been updated to reflect that retailers could lose up to 30%-40% of their annual revenue from the tobacco excise tax in duty-free areas.

KUALA LUMPUR (Nov 24): Retailers could lose up to 30%-40% of their annual revenue from the tobacco excise tax in duty-free areas.

In a statement today, the Langkawi Chinese Chamber of Commerce urged the government to reconsider imposing excise tax on cigarettes in all duty-free areas.

The new tax initiative was announced by Finance Minister Tengku Datuk Seri Zafrul Aziz during his Budget 2021 speech.

The chamber's president Lee Han Eng said imposing tax on popular items in duty-free areas will naturally lead to a fall in demand.

“More worrying is the fact that some retailers will not only lose purchasers of that particular item, they may potentially suffer from a drop in overall customer traffic.

“This would be especially so for retailers who specialise in offering a limited range of product items to cater to a predominantly tourist market,” he said.

Lee said duty-free areas do generate a positive multiplier effect on the Malaysian economy.

He said in addition to attracting local and foreign tourists, these areas generate jobs and business opportunities for locals while attracting domestic and international investments, from the property to hospitality sectors.

“The retail and tourism [industries] are some of the sectors that are suffering the most from the Covid-19 crisis.

“Imposing taxes that will cut their revenue further may result in many businesses going under, causing more job loss and income crunch,” he said.