KUALA LUMPUR: The government must remain vigilant in broadening its revenue base by regulating and taxing untapped novel industries like the multi-billion ringgit local vape sector in order to safeguard economic recovery, said investment and economic analyst Pankaj Kumar
Pankaj's comments came following the release of Bank Negara Malaysia's Economic and Monetary Review 2020 report on 31 March 2021.
"While the central bank has projected domestic economic rebound of between 6 per cent and 7.5 per cent in 2021, as compared to 5.6 per cent contraction last year, we are still not out of the woods yet.
"The economy is still at risk from the ongoing uncertainties surrounding the Covid-19 pandemic, possibility of commodity shocks and potential problems relating to vaccine roll-out," Pankaj said in a statement today.
He said in addition, Malaysia's household debt-to-GDP (gross domestic product) ratio has surged to new peak of 93.3 per cent and the federal government's debt has increased to 62.2 per cent of the nation's nominal GDP as at end-December 2020, from 52.5 per cent a year ago.
"We have a dire need to find new sources of revenue and untapped industries like the Malaysian vape sector provides an opportune avenue to contribute exponentially towards economic growth," Pankaj pointed out.
According to him, the vape sector drew his attention following a new study conducted by Grand View Research Inc that projected the global vape market size to reach US$67.31 billion (RM279.10 billion) by 2027, registering a revenue-based compounded annual growth rate (CAGR) of 23.8 per cent from 2020 to 2027.
"In tandem, the Malaysian vape industry has also grown to RM2.27 billion in value, with some 3,300 related businesses that employ some 15,000 personnel with a potential RM300 million revenue gain for the government if the taxation is broadened to include
nicotine vaping e-liquids," he said citing a report published by the Malaysian Vape Chamber of Commerce (MVCC) in February 2021.
He said studies have also shown that vaping has less harmful impact compared to tobacco products such as cigarettes and this a key factor in the boom for this industry globally.
Pankaj said an excellent case in point is China's leading vaping firm, RLK Technology Inc which reportedly raised US$1.4 billion (RM5.80 billion) in its initial public offering (IPO) in the New York Stock Exchange in January this year.
The company today has a market capitalisation of US$16.1 billion (RM66.76 billion).
"The government has made a good start by imposing excise duties on vape devices and products starting from 1 January 2021. However, this only covers non-nicotine based products, which is a very small fraction of the market.
"It is critical that comprehensive regulations and practical taxation policies that cover the entire vape sector, including nicotine vaping products, be put in place quickly in order to allow the Malaysian vape sector to contribute to tax revenue, bolster employment and potentially spur foreign direct investments," Pankaj said.