Malaysia Warned: Cigarette Tax Hike May Fuel Black Market
Malaysia’s plan to raise cigarette excise taxes to discourage smoking and boost revenue could backfire, warn policy experts. Without a significant crackdown on the existing black market and smarter regulation of alternatives like vapes, such a move risks fueling illicit trade and reducing overall tax collection.
Currently, Malaysia loses an estimated RM5 billion annually to an illicit cigarette trade that accounts for a staggering 54% to 60% of total consumption. Critics argue that sharp price increases on legal products will simply push more smokers, especially from lower-income groups, towards cheaper, untaxed options. Enforcement agencies report over 80% of illicit packs lack valid tax stamps.
In contrast, vaping tax revenue is significantly lower, totaling RM288 million since 2021. This suggests potential for a more controlled tax increase on vapes without immediately triggering a large-scale illicit market. Experts advocate for an “enforcement-first” approach before any major cigarette tax hikes, including implementing digital tax stamps, imposing tougher penalties, and enhancing border control. Without these foundational measures, a substantial increase in cigarette taxes alone risks expanding the powerful illicit trade network, undermining both public health and fiscal goals.
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