We are losing billions to illicit trade

WHENEVER there is talk of the country’s “thriving” illicit business, I often hear the comment, “the government could stop it if it wanted to”. This is the general public’s perception of the efforts made by enforcement agencies to halt, particularly, trade in contraband and counterfeit cigarettes, beer and liquor.

It was commendable of the Finance Minister to affirm in his budget speech that efforts to counter the distribution of illicit cigarettes will be increased to stop the leakage of about RM1 billion a year in taxes. While he did not touch on contraband and counterfeit alcoholic beverages, the recent amendment to the Customs Act 1967 that increased penalties for smuggling cigarettes and liquor reaffirms the serious intent to cut down on the loss of government revenues to illicit trade.

The amendment, among others, provide for a minimum fine of RM100,000 ; it should be noted that the initial proposed amend- ments included the words “shall be punished with whipping of not more than three strokes”.

In tabling the amendments, the Finance Ministry estimated the loss of taxes of RM4 billion a year based on seizures in 2017. However, industry players’ estimations are much higher. People in the beer industry alone estimate government losses of more than RM1.5 billion in revenue. Unverified sources claim more than 30% of famous liquor brands sold are counterfeit. The tobacco industry says 58%-62% of cigarettes sold in the market are illicit and loss in revenue is as high as RM4 billion. While the figures may differ, can the increased penalties alone stop such losses of tax revenue?

It cannot be denied that the key enforcement agencies responsible to address this menace – the Royal Customs Department, the Enforcement Division, Domestic Trade and Consumer Affairs Ministry, and health inspectors from the Health Ministry – have been working hard, conducting numerous operations and deploying tasks forces to coordinate operations. However, the continued presence of illicit cigarettes and alcoholic beverages demands that more coordinated action with enforcement agencies “talking to one another” be taken to see a significant impact on illicit trade.

Perhaps a central agency such as the National Revenue Recovery Enforcement Team of the Attorney-General’s Chambers or even the Finance Ministry can lead a task force to ensure a formidable result is achieved. This is especially so when the various enforcement agencies have their own priorities and legislations, such as labelling, security marks and compliance with intellectual property rights. Only a task force headed by a central agency will be able to better coordinate enforcement operations and review the roles of the various agencies.

The legitimate tobacco and liquor industries too need to play a role – it is not enough to merely say that they are losing millions of ringgit to the illicit traders. They can provide valuable information as well as help train officers on the ground in identifying illicit products.

The government should also relook the procedures for importing cigarettes and liquor, especially if the brands are already manufactured locally. Local authorities must also work with federal agencies to revoke licenses of premises found to be selling illicit tobacco and/or liquor.

There can be no better time than now for enforcement agencies to work as one to address the billions of ringgit lost every year due to the sale of illicit tobacco and liquor in the country.

GUNA SELAN MARIAN Former enforcement officer Tanjung Bungah, Penang