KUALA LUMPUR (April 14): The illegal trade of cigarettes cost small traders RM500 million in lost income last year, said Malaysia Singapore Coffee Shop Proprietors’ General Association (MSCSPGA).

It said Malaysia’s attempts to discourage smokers with higher taxes have fueled an illegal cigarette industry. After the government placed a 40% excise increase on cigarettes in November last year, retail sales of legal cigarettes have dropped by 30%, as more smokers resorted to buying cheap illicit cigarettes.

"The rampant illicit cigarettes trade has caused retailers to lose nearly half of their income from cigarette sales and they are now finding it very hard to survive," said MSCSPGA president Ho Su Mong in a statement today.

"Consumers can (now) easily buy illicit cigarettes anywhere in the country, thus almost half of the cigarette market is illicit," he added.

Ho pointed out that apart from drinks and food, the main source of income for coffee shops and restaurants is from selling cigarettes.

"Now that consumers have stopped buying cigarettes from the legal trade and instead, turn to suppliers of illicit cigarettes, local traders will be losing sales from other products as well," he said.

“Meanwhile, amid the challenging economic environment in the country, the goods and services tax implemented by the government last year has also added to the heavy business operational burden faced by our members and traders,” Ho added.

He noted that illicit cigarettes are selling below RM5 per pack, which is significantly cheaper than duty-paid cigarettes.

"Thus, retailers selling legal cigarettes can no longer compete with syndicates selling illicit cigarettes.

"It is our worry that, as consumers’ demand for legal cigarettes continue to decline, and more people have turned to buy illegal cigarettes, retailers like us could be driven out of business," said Ho.

The association is appealing to the government to consider the plight of retailers, including the coffee shop and restaurant trade, to overcome the rampant illicit cigarette trade.

Ho reaffirmed the positive measures that have been undertaken by the Royal Malaysian Customs through the Ops Outlet and Ops Pacak campaigns to combat cigarette smuggling activities in recent years.

“However, we hope to work more closely with the government to come up with solutions and policies to help reduce the burden and financial losses faced by our members and small traders, due to illicit cigarettes,” he said.

“Moving forward, it is important for the government to consider the views of retailers and small traders, especially when introducing severe regulations such as plain packaging for cigarettes, which could further worsen the illicit trade problem.

“We believe that these face-to-face talks can continue to ensure positive outcomes and a win-win solution for both the government and small enterprises,” he added.