Malaysia’s Illegal Cigarette Trade Situation Requires Urgent Attention

JTI Malaysia raises concerns that contraband cigarettes trading are reaching critical levels

JTI Malaysia is calling for more coordinated action against illegal cigarette trading that is growing at an increasingly fast pace in recent months and is reaching uncontrollable levels.

The country’s second largest tobacco company said with Malaysia having the highest illegal cigarette trading levels in the world at 58.9 percent of the market, based on the 2018 Illicit Cigarette Study(ICS) conducted by research house Nielsen and commisioned by the Confederation of Malaysian Tobacco Manufacturers (CMTM), decisive measures are needed to contain contraband trading before the situation deteriorates further.

JTI Malaysia Managing Director Cormac O’ Rourke said, “All indications from recent studies and reports from the market, as well as our observations on the ground, suggest that the situation is not improving and we are projecting that the Government will likely miss its revenue collection targets from the industry in 2019. There is a growing concern that contraband cigarette trading is gaining momentum in recent months.

“While the Government has passed laws in recent months that increases the penalties against contraband trading, this must be accompanied by strong action and enforcement at ground level if the Government is to have any success in stemming the tide of 12 billion sticks of illegal cigarettes flooding into the market.”

JTI Malaysia reiterated its earlier calls that the Government implement the following measures:

  • An excise tax moratorium for the next three (3) years to avoid any further price shocks
    leading to more smokers switching to illegal cigarettes and to also allow for enforcement
    actions to take hold;
  • A ban on transhipment for cigarettes at entry points in Malaysia, which has been
    manipulated to bring illegal cigarettes into the country. Furthermore, 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 importations into the country. Were this to be unpalatable, the
    Government could consider collecting tax on transhipped products exiting the port and
    refund once products leave the country. This has been successfully implemented in
    Singapore.
  • Establishment of an independent body to lead a special taskforce on addressing illegal
    cigarette sales comprising multiple relevant government agencies including industry
    representatives to ensure a comprehensive approach.

Additionally, O’ Rourke said while affordability of legal cigarettes has led to the current situation, the focus must now be on enforcement efforts if the country is to get to grips with this spiralling problem.

JTI Malaysia highlighted that it is monitoring the situation closely and is prepared to discuss further with the Government on its proposals.

 

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