‘60pc tax op­ti­mal rate to re­duce num­bers’

New Straits Times - - News -


MAY 14, 2017

z A STUDY by the Health Min­istry and Univer­siti Pu­tra Malaysia (UPM) on to­bacco tax­a­tion has pro­posed an in­crease of 60 per cent in ex­cise tax to raise the av­er­age price of a cig­a­rette pack to RM21.80, to gen­er­ate max­i­mum real ex­cise tax rev­enue of RM6.3 bil­lion per year.

Lead re­searcher of the study health econ­o­mist Dr No­rashidah Mo­hamed Nor said: “The study pro­jected that if the gov­ern­ment in­creases its to­bacco tax to 73 per cent of the av­er­age re­tail cig­a­rette price, Malaysia would be able to re­duce smok­ing preva­lence to 15 per cent by 2025 while re­duc­ing the num­ber of smok­ers by about 2.6 mil­lion by 2055 and avert­ing al­most 1.3 mil­lion pre­ma­ture to­bacco-re­lated deaths.”

This, she said, would re­quire an in­crease of to­bacco tax by 163 per cent.

“If this tax is fully passed on to con­sumers, the av­er­age cig­a­rette price would in­crease from RM17 to RM29.40, or by 73 per cent. How­ever, if we in­crease the tax to more than 60 per cent, it will lead to rev­enue of about RM4 bil­lion.

“As economists, we look at both sides of the coin. To achieve re­duced smok­ing preva­lence and in­crease rev­enue, an in­crease of 60 per cent ex­cise tax is the op­ti­mal rate.”

The UPM Fac­ulty of Eco­nomics and Man­age­ment se­nior lec­turer said en­hanc­ing the im­ple­men­ta­tion and en­force­ment of a set of non-price poli­cies should also be car­ried out si­mul­ta­ne­ously.

On the endgame tar­get of five per cent smok­ing pre­vaNo­rashidah lence by 2045, said it could be achieved with a 556 per cent tax in­crease ac­com­pa­nied by a sim­i­lar set of non­price in­ter­ven­tions.

“Even though the pro­posed tax in­crease may ap­pear sub­not stan­tial, they are un­prece­for dented. Ukraine, ex­am­ple, in­creased its ex­cise tax by 500 per cent in just two years, from 2008 to 2010.

“In 2013, the Philip­pines in­creased its ex­cise tax rate by 341 per cent on low-tier of­fences re­lated to cig­a­rettes and liquor.

“Go­ing for­ward, I’m cer­tain we will be able to con­tain smug­gling in our coun­try.

“The depart­ment aims to re­duce the num­ber of con­tra­band cig­a­rettes in the do­mes­tic mar­ket by 50 per cent in two years, but we are con­fi­dent we can do bet­ter.”

He said from Jan­uary to March this year, the depart­ment recorded 571 cases though raids on 808 premises, where 156.55 mil­lion cig­a­rettes. Both coun­tries achieved a sub­stan­tial re­duc­tion in smok­ing preva­lence and a sub­stan­tial in­crease in ex­cise tax rev­enue.” sticks of cig­a­rettes worth RM66.35 mil­lion in tax were seized.

“The seizures were made at ma­jor en­try points, such as in Port Klang, Se­lan­gor.

“We urge the pub­lic to join us in our war by pro­vid­ing us with the in­for­ma­tion and tip-offs. We guar­an­tee that their iden­ti­ties will be kept un­der wraps,” he said, adding that could con­tact the depart­ment through its hot­line, 1-800-88-8855. By Tha­ranya Aru­mugam

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