Illegal smokes, vape could cost Treasury RM6b annually, says tobacco maker

Danial Dzulkifly
JTI Malaysia managing director, Cormac O’Rourke, giving his opening remarks to reporter during the JTI media briefing in Kuala Lumpur August 6, 2019. — Picture by Hari Anggara

KUALA LUMPUR, Aug 6 — The government could potentially lose as much as RM6 billion in taxes from cigarettes and vaping products due to poor enforcement against smugglers, the Japan Tobacco International Berhad (JTI Malaysia) said today.

JTI Malaysia managing director Cormac O’Rourke disclosed that currently one in seven Malaysian smokers was imbibing illegal cigarettes and vaping products, and added that the numbers would rise exponentially if left unchecked.

O’Rourke said unlicensed vape shops and the trade in illegal cigarettes were growing due to corruption and lack of enforcement of laws regulating the use of nicotine, such as the Poison Act 1952.

“Why is the government not acting? In the cigarette industry alone, they are losing RM5 billion annually and yet we haven’t seen any sort of proper enforcement action taken,” he said during a media briefing on “Illegal Cigarette Trade and Vaping: A National Epidemic”.

He added that another potential RM1 billion in taxes would be lost through unregulated vape products.

“The reality is that Malaysia is in the grips of corruption and many institutions are failing and this is leading to a huge problem with illegal cigarettes and illegal alcohol,” he added.

JTI Malaysia also released today the results of its 2019 Wave 1 Illicit Cigarette Study (ICS), conducted between March and May, that showed illegal cigarettes now accounted for 60 per cent of the market, up 2 percentage points from last year.

O’Rourke noted that the increase occurred despite the introduction of harsher penalties for smuggling under the Customs Act 1962 in January.

He also claimed there was “wilful confusion” at the Health Ministry with its call for new laws before it could act against vaping, noting the existence of the Poisons Act 152 and the Sale of Drug Acts 1952 that already empowered them to do so.

O’Rourke said new laws would only hurt legal tobacco manufacturers that complied with the existing rules and regulations, claiming this would lead more to turn to contraband and vaping.

However, he said the Poisons Act should be updated to match current conditions.

“We had been optimistic that that new government would deliver on its election manifesto promise by tackling this epidemic but clearly they have failed to do so. We have not seen any significant improvement to date,” he said.

O’Rourke then suggested a three-pronged approach that included an independent task force on the matter, a moratorium on tobacco duty increases for three years, and a ban on cigarette transshipments in Malaysia.

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