SHAH ALAM - Illicit cigarettes are on the rise again in the first 6 months of this year after recording a decline from 63.8 per cent in 2020 to 57.7 per cent in 2021, causing Putrajaya to lose almost RM5 billion in taxes, said an international tobacco product manufacturer.
JTI Malaysia Managing Director Khoo Bee Leng said they urge Putrajaya to remain committed to tackle high incidence of illicit cigarettes in Malaysia through well-considered policies and sustained enforcement actions.
She said the most recent illicit cigarette study shows that the incidence grew in the first half of this year to 58.4% in March 2022 before settling back to 57.7% in May 2021.
"The legitimate industry is required by law to sell a pack of legal duty-paid cigarettes not less than RM12.00 per pack. In contrast, illicit cigarettes are sold between RM4.00 to RM6.00 per pack," she said in a statement.
She said the growth of the illicit cigarettes market is mainly due to the large price differential between illicit cigarettes and legal duty-paid products.
"Malaysians are recovering from the impact of the pandemic, and their household budgets have been hit hard with rising cost of living.
"Any increase in the excise rate, which will definitely lead to an increase in the price of legal cigarettes, will cause more consumers to switch to illicit cigarettes," she said.
Khoo said tighter policy against transhipments implemented by the finance ministry and numerous enforcement the police and the customs have resulted in reducing the number of illicit cigarettes in Malaysia since 2020.
"The fight against illicit cigarettes requires sustained enforcement and sensible policies.
"It is possible that the incidence may increase as the unintended consequence of policies that ignore the market realities”, she added.
Use Sosma, Poca, Amla to deter illegal contraband
Khoo said serious measures such as stronger investigative powers, detention and intercept communication channels are needed to enforce and prosecutive the culprits.
She added the prosecution should include Security Offences (Special Measures) Act 2012 (Sosma), Prevention of Crime Act 1959 (Poca) and Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Amla) to stop such organised crimes of smuggling cigarettes which is also being used for narcotics and fake goods.
Some of the latest modus operandi are ship-to-ship transfers with supply vessels hover outside Malaysia's territorial waters and "they deactivate their automatic identification system that normally automatically transmits vessel identity, speed and global positioning system (GPS).
"The supply vessels then off-loaf illicit cigarettes onto receiving vessels," she said.
She recommended Putrajaya establish specialised task force comprising marine police, maritime agency. navy to coordinate operations. "It is crucial to intercept all vessels, both supply vessels and receiving vessels that have switched off their transponders," she said.
Khoo also urged Putrajaya to enact regulations on vape e-liquids as the government loses RM750 million from uncollected excise duties. "Regulations on e-liquids are needed as it is easily available despite it being under Poisons Act 1952," he said.
She further recommended the government to collect RM1.20 for every millilitre of excise duties as announced under Budget 2022.