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Illicit cigarettes, vape bleed Malaysia
KUALA LUMPUR: Malaysia has the unenviable honour of sitting on the throne of the highest level of illegal cigarettes in the world.
This bleeds the country of at least RM5bil annually in uncollected taxes from the illicit cigarette trade.
With the unregulated vaping products factored in, the government stands to lose RM6bil in total every year.
To put it into perspective, the second Penang Bridge and KLIA2 each costs around RM4bil.
Illegal cigarettes and unregulated vaping products have since ballooned to 70% of the total consumption in the country.
Illegal cigarettes make up 60% of the consumption, which translates to an estimated volume of 2.8 billion sticks.
According to a report by Euromonitor International in June, Malaysia had the highest level of illegal cigarettes in the world with a market penetration of 63%. This was close to six times the average of illegal cigarettes sold globally.
The only other Asian countries in the top 20 were Taiwan at 25% and India at 24%.
JT International Bhd (JTI Malaysia) managing director Cormac O’ Rourke said the issue is now beyond crisis point at this stage and he questioned why there was no action taken by the government.
The Illicit Cigarettes Study found that the consumption of illegal cigarettes rose 1.7% from March to May this year, compared to the same period last year.
There was a record-high illicit cigarettes with fake tax stamps of 7.4% for the period compared to 4.9% last year.
Speaking to reporters at a briefing yesterday, O’ Rourke added that the early indication for the next wave is that there is a further increase in illegal cigarettes.
He urged the government to commit to an excise moratorium for at least three years, and only consider an excise increase thereafter when improvements have been made to the illicit trade.
He also suggested the banning of the transshipment of tobacco products via Malaysia, which is among the main methods used to smuggle illicit cigarettes into the country.
“Products come through the ports in containers, purportedly for outward shipment to other countries. They leave the port but they never leave the country.
“And if the government feels that it is unable to ban the transshipment, then it can do what Singapore has done, which is to collect the tax upfront from these products and refund those who are moving once they leave the country, ” he said.
O’ Rourke added that there should be an independent body to lead a special task force so that enforcement agencies can come together under one umbrella to ensure a comprehensive approach.
JTI Malaysia also estimated that vaping has more than doubled between 2018 and 2019 and now makes up around 10% of smokers in the country, with the uncollected tax from this business said to be around RM1bil.
All nicotine products are subject to the Poisons Act 1952 and since no licence has been issued by the Health Ministry for vaping products in the country, vaping is technically illegal in Malaysia.
Those who want to import, sell or distribute nicotine must first apply to the National Pharmaceutical Regulatory Agency (NPRA) but none have been successful in obtaining the licence.
This includes JTI Malaysia, which was unsuccessful in the process of applying to sell its own vaping products.
“This tells you that the only vaping products that are available for Malaysian consumers are those that are sold illegally. More and more illegal vape products penetrating the market everyday.
“What is the confusion with the Health Ministry? Why is it failing to act? It has enforcement divisions and specifically, through the NPRA.
“What is needed now is for the ministry to step up and enforce. If it is serious about offering Malaysian consumers alternatives to smoking, it must make an amendment to the Poisons Act to allow Malaysian consumers access to products which do adhere to controls and standards, ” he said.
Japan Tobacco International’s e-cigarette or vape brand is known as Logic, while its heated tobacco brand is known as Ploom and these are available in other countries.
O’ Rourke said reduced risk products have a place to play in Malaysia and while JTI Malaysia wants to bring these products to Malaysia, it is stopped from doing so.
Source: https://www.thestar.com.my/business/business-news/2019/08/07/illicit-cigarettes-vape-bleed-msia#btBJAsomoHrbhhHz.99