Malaysia No.1 in the world for illegal cigarettes, says study

Nearly 60% of cigarettes sold in the country are illegal, according to a new study.

PETALING JAYA: A whopping 58.9% of cigarettes sold in Malaysia are illegal, making it the country with the highest penetration of illicit cigarettes in the world, according to a study commissioned by the Confederation of Malaysian Tobacco Manufacturers.

At a press conference on the study by research house Nielsen here today, Cormac O’Rourke, the managing director of tobacco company JT International Bhd (JTI Malaysia), said the figure represents approximately 12 billion sticks, an increase of 3.3% from 2017.

The 2018 Illicit Cigarette Study saw a total of 153,000 discarded cigarette packs collected from the streets and rubbish bins across the country throughout the year.

These were analysed for local tax stamps and authentic packaging, among others.

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.

JTI said the results also highlight a worrying increase in smuggled cigarettes with fake tax stamps.

“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.

He attributed the growth of illicit cigarettes to what he called excessive increases in tobacco excise duties and cigarette prices over the years, as well as insufficient enforcement.

JTI said under the law, tobacco companies must increase cigarette prices by the same quantum as increases in excise duty, meaning that tobacco companies cannot absorb excise duty hikes.

O’Rourke said the situation caused the government to lose up to RM5 billion in uncollected tax revenue, with these losses appearing set to continue.

He also said the Pakatan Harapan-led government should deliver on its election manifesto on stopping the smuggling of illegal cigarettes, and proposed three measures to deal with the situation.

He called for an excise moratorium for the next three years to prevent the price shocks which drove smokers to illegal cigarettes.

A ban on transhipment for cigarettes at entry points in Malaysia should also be put in place, as these had been manipulated to bring illegal cigarettes into the country, he said.

“Additionally, there should only be a single point of entry for any importation of cigarettes into Malaysia.

“The aim is to avoid the manipulation of processes and procedures and enable better focus and monitoring of cigarette importation into the country.”

O’Rourke also called for the establishment of an independent body to lead a special task force to address illegal cigarette sales.

This independent body, he said, should comprise multiple government agencies and industry representatives.

He added that any move by Putrajaya to introduce further regulatory measures on the legitimate tobacco industry would only worsen the problem.

“Enforcement of existing regulations should be their primary focus, given that 60% of all cigarettes consumed by Malaysians today comply with no regulation in force.

“This is a clear policy failure the government cannot choose to ignore.” - FMT