KUALA LUMPUR, Dec 2 — The Labuan Chinese Chamber of Commerce wants Datuk Seri Tengku Zafrul Abdul Aziz to show proof that Malaysia’s duty-free islands are trade hotspots for illegal cigarettes.

Its president Datuk Wong Kii Yii was responding to news reports citing the finance minister’s proposal to end the duty-free status enjoyed by some island — Labuan included — to curb the shadow economy that has impacted tax revenue.

“We would like to see for ourselves the finance minister’s so-called analysis that prove duty-free areas act as hubs for the illegal cigarettes trade,” Wong said in a statement rejecting the minister’s argument and proposal.

He said that the chamber’s sales records show that Labuan sells a total of 300 million sticks of duty-free cigarettes annually, adding that it is in line with local and tourist demand.


“This is a far cry from the minister’s ‘high volumes that makes no sense’ comment,” he said, adding that the finance minister’s remarks reflected badly on the Perikatan Nasional federal government.

Wong was responding to Tengku Zafrul’s remarks in an interview with business paper The Edge on November 28, in which he questioned the high sales of cigarettes sold on duty-free islands and its per capita consumption, suggesting that syndicates could be taking advantage of the tax exemption to run an illegal trade.

The minister was also reported saying the government is looking to improve its revenue collection next year, which includes recovering monies stolen by the shadow economy. This would mean excise duties may be imposed on cigarettes sold on duty-free islands.


Wong was sceptical of the Finance Ministry’s data analysis and believes it is also misinformed on how illegal cigarette syndicates operate.

“There needs to be a distinction between what is claimed to go into duty-free islands and what is sold on duty-free islands.

“Once that is established, the right control is then to limit the quantity that goes into islands instead of removing duty-free status completely,” he said.

He invited Tengku Zafrul and Finance Ministry officials to visit Labuan and inspect the situation for themselves.

“Go ahead, audit us. Our members will be more than happy to cooperate.

“Our island is not that big, it is hard to hide containers full of cigarettes,” he added.

Wong said Malaysia’s economy would be hurt if the government rescinded the tax exemptions on imported cigarettes on the duty-free islands.

“Cigarettes are one of the most popular retail items in any duty-free area.

“Take it out of the equation and there will be a severe shortfall in retail income,” he cautioned.

He said Labuan’s economy is already battered by a decline in oil-and-gas exports and the Covid-19 pandemic.

“The Covid-19 pandemic and now, the new excise duties on duty-free cigarettes, may just be the straw that breaks the camel’s back,” he said.