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Tax e-cig, vape products to generate revenue, JTI told the govt

New Straits Times logo New Straits Times 21/7/2021 Azanis Shahila Aman
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KUALA LUMPUR: E-cigarettes and vape-based products sold on the market should be taxed regardless of their nicotine content to generate revenue for the government.

Japan Tobacco International Bhd (JTI Malaysia) managing Director Khoo Bee Leng said the government must tax all liquids used for vaping sold in Malaysia as a source of additional revenues.

"At the moment, this growing category is not taxed, which enables it to be sold at prices even below that of illicit cigarettes, thus eroding the recovery of the legal cigarette industry volume," she told reporters in a virtual press conference on Wednesday.

She also highlighted that there are vape liquids equivalent to 12.5 billion sticks widely available here that are currently not paying tax.

JTI corporate affairs director Shaiful Bahari said the government stands to gain an estimated tax revenue of more than RM250 million if appropriate vape regulations are introduced.

"If the tax is at the current rate of 40 sen per millimetre (ml), the government will start to gain roughly about RM250 million.

"But, if it is closer to RM8, then I think the government will stand to gain about RM5 billion. It is more than what legal cigarettes contribute annually," said Shaiful.

The incidence of illicit cigarettes saw a 6.2 per cent dip in May 2021, down to 57.9 per cent, from 64.1 per cent in December 2020, according to the latest Illicit Cigarettes Study (ICS) commissioned by the Confederation of Malaysian Tobacco Manufacturers (CMTM).

This is the first time that illicit cigarettes have decreased in the past six years, since 2015.

Khoo said the implementation of tighter controls and greater scrutiny on the import of cigarettes by the government have led to early signs of improvement.

She said the reduced incidence of illicit cigarettes is an early sign of improvement attributed to policies announced by the Minister of Finance (MoF) during Budget 2021.

"These include halting the issuance of new import licences, tightening the renewal of import licences, limiting transhipment of cigarettes to five dedicated ports and imposing a tax on importing cigarettes with drawback facilities for re-export.

"The government must remain steadfast in its policies when facing opposition by parties with vested interests to have those policies revoked," she said.

In 2015, the government raised the tax on cigarettes that led to a 43 per cent increase in the incidence of illicit cigarettes.

Since then, the incidence of illicit cigarettes in Malaysia has stood at over 50 per cent, increasing every year to the highest level of 64.1 per cent in December 2020.

Khoo said the first-time reduction in the incidence of illicit cigarettes should not be viewed as an opportunity to increase excise tax on cigarettes.

"Any widening of the price gap between legal cigarettes and illicit cigarettes, such as by a tax hike, will reverse the progress made in the first half of 2021.

"It is important to note that the government's overall revenue will automatically improve along with any recovery of legal tobacco industry volumes. This is a win-win situation for both parties and consequently for the nation too," she said.

On the industry outlook, Khoo said there had been some good recovery for the tobacco market this year.

She said JTI Malaysia is doing well with the growth of 4 per cent share last year.

"If the government policies continue to be enforced, I believe they will be a slow recovery for the total legal tobacco industry.

"So far, I think the industry has already recovered about 2 per cent, and we will continue to see this trend if the government continues to strengthen existing policies, respond to emerging threats, intensify enforcement and address price differences between legal cigarettes and vape liquids," she added.

© New Straits Times Press (M) Bhd

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