To curb tobacco black market, address price gap between legal and illegal tobacco products, says NGO

Linda Kumar
·2-min read
High excise duty on tobacco products can be counter-productive... pushing consumers to buy illicit cigarettes. — Picture by Shafwan Zaidon
High excise duty on tobacco products can be counter-productive... pushing consumers to buy illicit cigarettes. — Picture by Shafwan Zaidon

KUALA LUMPUR, Dec 4 — Malaysia can learn from Australia’s mistake in tackling the tobacco black market by imposing higher excise duty on tobacco products, said an international non-governmental organisation (NGO) based in Australia.

Retail and Trade Brands Advocacy (RTBA) was commenting on a report by the Australian Parliamentary Joint Committee on Law Enforcement on the illicit tobacco market which said the price-based approach led to a growing number of people turning to cheaper alternatives to legal cigarettes instead.

The tobacco black market in Australia has grown in the last few years; a total of 633 tonnes of illicit tobacco was seized in 2018-19.

“This Joint Committee Report offers the Malaysian government strategic insights into tackling the tobacco black market, whereby Malaysia is currently leading the world with illegal cigarettes that take up 64.5 per cent of the total market,” said Health Michael, managing director of RTBA.

“The Malaysian government has made the necessary step in curbing the tobacco black market problem with several enforcement-based initiatives announced in Budget 2021. These efforts, including the clampdown on transhipment abuse, indicates a resolve to take action.”

He added, however, that these measures “would not be enough to bring down illegal cigarette incidences in a meaningful manner.”

“Criminal syndicates are very clever at circumventing enforcement efforts. If there is a will, there is a way. We foresee that these criminals will quickly move to another channel to smuggle cigarettes into Malaysia and re-exporting them to other countries.

“In order to really make a dent in stopping the tobacco black market, RTBA recommends removing the will of these syndicates to operate. This can only be achieved by closing the price gap between legal and illegal products, which can reach as wide as a factor of 3 to 4 in Malaysia,” Heath said.

He also said that there are many ways to address this price gap, including strategies like introducing products at prices targeting black market consumers which have worked in some countries.

“In order to arrive at an optimum solution that addresses the supply and demand aspects of the tobacco black market, rational and innovative thinking are required.”

RTBA is a coalition of business, retailers and trademark holders working to protect the retail and supplier industries in the Asia-Pacific region from the impact of criminal conduct.

More information about RTBA is available at www.rtbacommerce.com.

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