I BELIEVE that the taxes on cigarettes are high enough and do not need to be further increased in the next budget as an increase will make the illicit trade on tobacco products increase and cause more losses to government revenue as a result of the smuggling of the products.
With every increase in import tax and excise duty on cigarettes, the profit incentive for smuggling becomes more attractive — big enough for crime syndicates to pay off all enforcement units at the various border points and still have enough to make them rich.
Malaysia has more border entry points than other countries like Singapore, Hong Kong and Australia. Although these countries impose higher taxes on cigarettes to make them expensive, their exposure to smuggling (with fewer entry points) is lower.
Malaysian borders are notoriously porous. Our officers have been threatened for not cooperating and turning their ears and eyes away from the smuggling taking place right in front of them. We can lecture our officers to fear God but we cannot do that to the Thai, Indonesian and Filipino border units, and the pirates and fishing boats from neighbouring countries that roam the seas selling contraband goods.
It is reported that the loss in revenue from the smuggling of cigarettes is estimated at RM4 billion. Worse than the revenue loss, the smuggling business often spawns the rise of gangs and gun violence. The huge profits made from smuggling of contraband could also lead to money laundering for terrorism and subversive activities.
The duties on gambling and cigarettes, as well as on beer and hard liquor, are termed as “sin taxes” in Malaysia.
I hope the Treasury will not increase the sin taxes again in the coming budget exercise as high taxes will only result in diverting the trade to smugglers and underground operators, causing unnecessary loss of federal rev enue. This will make it difficult for the government to reduce the budget deficit and achieve a balanced budget by 2020, which is essential in view of the depressed oil prices and continuing uncertainties in the global economy. To be pragmatic, the government may want to review the sin taxes to make them easier to collect and strengthen government revenue.
Tan Sri Mohd Sheriff Mohd Kassim, Kuala Lumpur