It’s an enforcement issue

14 May 2017:

TOBACCO manufacturers are maintaining their stand that any additional tax increase on cigarettes will only spur the “burgeoning illegal cigarette trade”.

The Confederation of Malaysian Tobacco Manufacturers (CMTM) said the move would see a “no-win situation for all parties”, namely the Health Ministry in its bid to reduce smoking prevalence; Finance Ministry in its bid to increase tax revenue collection; and, the legitimate tobacco industry on its sustainability.

CMTM said the consumption of black market cigarettes stood at 57.1 per cent, based on the Illicit Cigarette Study by Nielsen Malaysia in December 2016.

“With illegal cigarettes dominating more than half of the cigarettes consumed in the nation, CMTM believes that any further round of excise-led price increases will just be another windfall for criminals behind the hundreds of unregulated and tax-evaded illegal cigarette brands.

“These black market cigarettes have already overtaken the regulated legal segment. They are sold for between RM3 and RM5 per pack.

“As the illegal cigarette trade grew last year, the total legal volume in Malaysia experienced a significant decline by more than 25 per cent compared with 2015.

“At this rate, the sustainability of legitimate businesses will be at risk,” CMTM told the New Sunday Times.

It also claimed that illicit cigarettes were the main reason behind the increase in smoking prevalence in Malaysia.

It cited surveys by the Health Ministry that showed the number of smokers in Malaysia increasing from 4.75 million in 2011 (Global Adult Tobacco Survey 2011) to five million in 2015 (National Health and Morbidity Survey 2015), along with the average number of sticks smoked from 14 sticks to about 18 sticks.

“It is clear that smokers have shifted their consumption to illegal cigarettes instead of quitting, while the legitimate cigarette volume declined by more than 30 per cent during the same period.”

It said the Tobacco and E-Cigarette Survey among the Malay-sian Adolescent 2016, released by the Health Ministry recently, also revealed that 71.6 per cent of adolescents who smoked spent less than RM9 on a pack of cigarettes, which is below the minimum cigarette price of RM10.

“The cheap price and easy access to illegal cigarettes are the reasons why adolescents pick up the habit,” it said.

CMTM also claimed that, despite higher cigarette prices, the number of smokers continued to rise.

It cited the National Health and Morbidity Survey, which reported an increase in smoking prevalence from 21.5 per cent in 2006 to 22.8 per cent in 2015, despite seeing the prices of cigarette almost double during the period.

Health economist Dr Norashidah Mohamed Nor said the effects of a high tax increase imposed in November 2015 would only be reflected in the next National Health and Morbidity Survey (NHMS) in 2019.

“NHMS 2015 did not capture significant effects of reduced smoking prevalence since the data was collected from 2011 to mid-2015,” she said.

Southeast Asia Tobacco Control Alliance senior policy adviser Dr Mary Assunta Kolandai said the population increase in Malaysia was another reason why it could appear that the number of smokers in Malaysia was increasing.

She said under the World Health Organisation’s Framework Convention on Tobacco Control, a tobacco tax increase in Malaysia was inevitable.

“Singapore, Australia and Hong Kong all have much higher tobacco taxes than Malaysia, but also much lower illicit trade. Smuggling of tobacco is an enforcement issue.”



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