KUALA LUMPUR, 23 April 2020 – The number of Malaysians turning to illegal cigarettes is expected to rise further following the COVID-19 pandemic, a leading market research company reports today.
Steve Murphy, the Managing Director & Co-founder of Green Zebras, says, “Under any circumstances, affordability will always remain the primary reason Malaysian consumers turn to cheaper alternatives when it comes to purchasing their daily essentials and services.”
“The income of Malaysians will be significantly impacted as a result of the COVID-19 pandemic and Movement Control Order (MCO). As incomes shrink, demand for cheaper, black market products will likely grow.
HIGH EXCISE DUTY
This will certainly be the case for cigarettes, as the products are considered expensive in Malaysia because of high excise duty while illegal alternatives are easily available and at a much cheaper cost,” he added.
Murphy’s revelations came as a follow-up to The Green Zebras’ Malaysian Perception of Smoking and Vaping Survey.
The survey found that a majority (51%) of Malaysians say that the level of taxation in Malaysia is a little too high, while 23% say the income tax is much too high.
Additionally, 81% of those between 19 to 39 years old feel that the current level of taxation is a financial burden to them.
Most respondents to the survey (91%) agree that the cost of living in Malaysia today is higher as compared with five years ago.
Nearly all, smokers (93%) and non-smokers (93%) alike, agree that smokers are more likely to move to buy illegal cigarettes as a result of the high excise duties resulting in higher cost of legitimate cigarettes.
RM5B TAXES LOST
A majority of the respondents (89%) were concerned about the RM5 billion in taxes lost to the illegal cigarettes trade and agreed that the recovered funds should be redirected to initiatives that benefit the society.
Pankaj Kumar, news columnists and former Chief Investment Officer & Head of Research, commented says, “Illegal cigarettes have impacted not only consumers but also business owners.
“Many of the legal manufacturers and shop owners that sell licit cigarettes are currently bleeding as a result of illegal cigarette trade in the region.“
“If illegal cigarette trade remains rampant, many legitimate businesses will have to cease their operations in Malaysia. There will be an adverse effect on this radical move, an increase in unemployment and loss in tax revenue for the Government.”
Pankaj further adds, “With MCO in place, it is easier to vet vehicles passing through major road networks and the authorities can also double up to check on illicit cigarette trades and cut-off the supply chain.”
Datuk Sri Akhbar Satar, a criminologist and certified fraud examiner, says, “Illegal trade encourages criminal activities, corruption, social ills and possibly, terrorism activities.
“Billions lost in these illegal trades can be channelled towards the development of public welfare and economic growth. This is an unfortunate reality when you lose such scale to illegal cigarettes trading. The billions lost is important in the current climate, where COVID-19 has affected millions of people, be it directly or indirectly.”
“In order to curb illicit cigarette trade, the Government needs to find the root cause through bold demand-driven policies, stricter enforcement and enhanced collaborations at an intra-regional level.”
This survey has indeed provided the answer – affordability, he says, asking, “What is the next for the Government? Close the price gap between licit and illicit cigarettes. Take away criminals’ motivation to smuggle.”
The sample size of Green Zebras’ Malaysian Perception of Smoking and Vaping Survey is 1,010 Malaysian adults.
It also reflects the perception of all Malaysian adults across Peninsular Malaysia. Detailed results of the survey can be found here.