Malaysian smokers buy 1,000 packs of illegal cigarettes each minute to avoid tobacco tax
- The Southeast Asian country has the world’s highest share of illegal tobacco sales at 59 per cent of its market
- Malaysia has sought to curb smoking-related illnesses, which are the main causes of premature death in the country
The Southeast Asian country has the world’s highest share of illegal tobacco sales at 59 per cent of its market, with 1,000 illicit cigarette packs bought each minute, Oxford Economics said in a report commissioned by British American Tobacco. That has cost the government 13.5 billion ringgit (US$3.3 billion) of revenue in unpaid taxes since Malaysia raised excise duties on cigarettes in 2015, according to the report.
The finance ministry did not immediately respond to questions on the state revenue loss.
Malaysia has sought to curb smoking-related illnesses, such as cancer and cardiovascular diseases, which are the main causes of premature death in the country, according to the health ministry. About 22.8 per cent of Malaysians aged 15 or older are smokers in 2015, a slight decline from 23.1 per cent in 2011.
BAT’s Malaysian unit has long campaigned against excise increases by warning that it would worsen the illegal tobacco trade, which the company said is a key reason for its shrinking sales volume. Its revenue fell 3.2 per cent in 2018 on declining sales of cigarettes and contract manufacturing after it closed a factory near the capital Kuala Lumpur.
The company’s rival Japan Tobacco closed its Malaysian plant in 2017 and bought stakes in Indonesian and Philippine producers that same year.
The study commissioned by BAT showed about 598 million packs in Malaysia were illegal in 2018. Nearly half of the consumption were “illicit whites” that are smuggled into the country from neighbouring Indonesia, Philippines and Vietnam due to cheaper prices. Others include illegal kretek, or clove cigarettes, and packs with fake tax stamps.
Illegal cigarette sellers resort to marketing products online and delivering them to doorsteps while placing GPS trackers on law enforcement vehicles to outpace them, said Erik Stoel, managing director of BAT Malaysia.
