Tobacco manufacturer says nearly two in three cigarettes here smuggled

JTI Malaysia general manager Cormac O’Rourke briefs the media on the latest findings on the illegal cigarette trade in Malaysia, in Kuala Lumpur April 3, 2019. — Picture by Choo Choy May
JTI Malaysia general manager Cormac O’Rourke briefs the media on the latest findings on the illegal cigarette trade in Malaysia, in Kuala Lumpur April 3, 2019. — Picture by Choo Choy May

KUALA LUMPUR, April 3 — Contraband cigarettes accounted for 58.9 per cent of all sales last year, according to Japan Tobacco International Berhad’s (JTI Malaysia) 2018 Illicit Cigarette Study (ICS).

In the study, the contraband rate was highest in Malaysia, followed by Brazil and the Dominican Republic.

Malaysia’s rate amounted to nearly three million sticks and was a 3.3 per cent increase from 2017, it said extrapolating from official smoking data.

Smuggled cigarettes were most prevalent in Sabah, Sarawak, Pahang, Kelantan and Terengganu, where up to four of every five sticks sold were illegal.

“Malaysia is regrettably one of the few countries in the world where illegal sales continue to thrive unabated with the situation now surpassing crisis levels,” said JTI Malaysia general manager Cormac O’Rourke during a media session at Menara Manulife in Damansara today.

“One of the key reasons why enforcement actions have not been able to contain and stop the overwhelming presence of illegal cigarettes in Malaysia is the lack of effective and coordinated enforcement efforts which enable illegal cigarette smugglers to manipulate existing loopholes and take advantage of porous borders as main smuggling routes into Malaysia,” he added.

O’Rourke asserted that the government was losing RM5 billion annually in foregone taxes and duties as a result of contraband, saying the problem was also flagged by the World Health Organisation due to high prices here.

He blamed the issue on “hyper taxation” that he said priced cigarettes outside the affordability of most Malaysian.

Legal cigarettes sold for up to RM17.40 per pack of 20 sticks, which O’Rourke said was vastly more expensive than contraband that went for between RM3.50 and RM5.00.

O’Rourke then repeated the industry’s call for lower duties, this time suggesting a tax moratorium, saying such moves had helped Canada and Sweden increase total collections while lowering the effective tax rates.

“Also please remember that illegal cigarette sales are not a victimless crime, it’s funding criminal gangs and this is very much the case here also,” he added.

He also called for a ban on cigarette transshipments in Malaysia and for a single point of entry for any importation of cigarettes into the country to minimise risk of manipulation.

Finally, O’Rourke suggested the government establish an independent special task force on addressing illegal cigarette sales.

“It should comprise relevant government agencies including industry representatives to ensure a comprehensive approach,” he added.

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