The tax would be in place on cigarettes and tobacco products in all retail zones and outlets that sell duty free cigarettes, as of January 2021.
The excise duty will be of a 10% rate of the value of the products and it would be imposed on all types of electronic cigarettes devices and regular cigarettes. “Electronic cigarettes liquid too will be subjected to an excise duty at a rate of 40 sen per millimeter,” said the Finance Minister during the tabling of a 2021 Budget session.
Tengku Zafrul said that the tax would be in place on cigarettes and tobacco products in all retail zones and outlets that sell duty free cigarettes, as of January 2021. Moreover, he added, the issuance of new cigarette licences will be frozen, since new restrictions on the licensing process will be issued.
New restrictions on the transhipment of cigarettes activities will also be set in place. “We will impose taxes on drawbacks on all imported cigarettes for the purpose of transhipment and re-exports,” said the minister.
JTI had called for shipping restrictions
Meanwhile, the Malaysian sector of Japan Tobacco International (JTI Malaysia) has recently called for concrete actions against the illegal trade of cigarettes, such as restrictions on shipments and points of entry.
JTI’s MD Cormac O’Rourke, said that besides the RM5 billion loss in revenue faced each year, Malaysia must also take into account the losses from illegal vaping, which he said are estimated at RM2 billion annually. He said that authorities should consider a ban on the transshipment of cigarettes and designate a single point of entry to support enforcement efforts better.
Big tobacco’s excuse as to why the tax is a bad idea
O’Rourke added that in order to prevent further losses, the government should continue the moratorium on tax excise increase. “Certain quarters are calling for a tax hike on tobacco products in the upcoming Budget 2021, but we must caution the government in the strongest possible manner not to impose any tax excise increase on tobacco products. This will only serve to worsen the situation and further damage legitimate retailers’ businesses which are already under pressure.”
“An excise hike this year would widen the price gap between legal and illicit trade and will inflict damage on the legitimate industry and small and medium-sized enterprises (SMEs) alike,” he said.
“I think there is a real need now to support SMEs. The Finance Ministry has the opportunity to do so by allowing third duty payment for the legitimate tobacco sector. This will improve the cashflow for the legitimate tobacco sector, and we can pass this on to our SME partners. Many of these 60,000 retailers are struggling now when it comes to liquidity,” he explained.
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