JTI proposes excise moratorium on cigarette prices for next 3 years

KUALA LUMPUR: JT International Bhd (JTI) has proposed an excise moratorium on cigarette prices by the government for the next three years, as a key measure to counter the sale of illegal cigarettes.

Managing director Cormac O’ Rourke said illegal cigarette sales in Malaysia reached a dizzying new height of 58.9 per cent last year, according to the 2018 Illicit Cigarette Study (ICS).

He said it should be addressed quickly as Malaysia will be losing up to RM5 billion in uncollected tax revenue per annum.

“Malaysia is regrettably, one of the few countries in the world where illegal cigarettes sales continue to thrive unabated with the situation now surpassing crisis level.

“The situation can only be addressed by a greater and sustained level of strategic enforcement to curb the supply and demand of illegal cigarettes,” he told a media briefing on the illegal cigarette trade yesterday.

While the Royal Malaysian Customs is tasked with leading enforcement at Malaysian borders, he said the sheer size of about 12 billion illegal cigarettes being sold annually in Malaysia, indicated that more needs to be done and a collective multi-agency approach was now desperately required to improve the situation.

“A key reason why enforcement action has not been able to contain and stop the overwhelming presence of illegal cigarettes sales, is the lack of effective and coordinated enforcement efforts, which enables smugglers to manipulate existing policy loopholes and take advantage of porous borders as the main smuggling routes into Malaysia,” he added.

Alongside the excise moratorium, O’ Rourke also proposed the government ban the transhipment of cigarettes at entry points in Malaysia, which has been manipulated to bring illegal cigarettes into the country.

“There should only be a single entry point 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 cigarettes importation into the country,” he said.

According to the ICS, illegal cigarettes sales were most widespread in Sabah and Sarawak, as well as the east coast, with the provincial incidence now reaching an all-time high of 80 and 70 per cent respectively, while in other states, it ranged between 40-50 per cent.

O’ Rourke said the latest study also highlighted a worrying increase in smuggled cigarettes with fake stamps since 2016.

Due to this, he also proposed the establishment of an independent body to lead a special taskforce on addressing illegal cigarettes sales comprising multiple relevant government agencies and industry representatives to ensure a comprehensive approach.

“The government must also carefully review any additional technological measures for tax stamps that would increase costs, but have no impact on reducing the proliferation of illegal cigarettes in Malaysia.

“It would not be prudent to attach such high costs associated with the current tax stamp regime, especially against the backdrop of the high level of illegal cigarette sales,” he added.