CMTM: The Incidence of Illicit Cigarettes in Malaysia Declined vs 2023

Kuala Lumpur, 7 August 2024 — According to the latest Illicit Cigarettes Study, the incidence of illicit cigarettes in Malaysia declined from 56.6% in 2023 to 54.8% in May 2024. 

There are 3 types of illicit cigarettes in Malaysia, namely smuggled white cigarettes, smuggled kretek cigarettes and cigarettes with fake tax stamps. Smuggled white cigarettes declined by 7.6pp in smuggled white cigarettes from 39.5% in 2023 to 31.9% in May 2024. However, the decline is mostly neutralized by a corresponding 6.9pp increase in cigarettes with fake tax stamps from 8.7% in 2023 to 15.6% in May 2024. Meanwhile smuggled kretek cigarettes remain unchanged at 7.3%.

CMTM acknowledges and appreciates the commendable efforts of the Royal Malaysian Customs Department (RMCD) under the leadership of Director-General Dato Anis Rizana Zainuddin as well as other enforcement agencies such as the Royal Malaysia Police and the National Kenaf and Tobacco Board in combating the trade in illicit cigarettes.

From January to May 2024, the RMCD foiled more than 3,000 attempted smuggling of illicit and contraband goods. These actions have greatly contributed to the reduction of smuggled white cigarettes in line with YAB Dato’ Seri Anwar Ibrahim’s drive to address leakages in the Malaysian economy.

Illicit Cigarettes Declined

Smuggling syndicates are increasingly affixing fake tax stamps on smuggled cigarettes to mask their illicit status, misleading some retailers into displaying those products on their shelves, and confusing consumers into buying them. CMTM urges the Government to intervene and implement modern solutions to address the growth of cigarettes with fake stamps while persisting in its efforts to curb smuggled cigarettes. 

While the incidence of illicit cigarette still represents a significant loss of excise revenue for the Government, the promise being shown in the declining incidence of illicit cigarettes is proof that the measures implemented by the Government is on the right track.

The decline in illicit cigarettes presents an opportunity for the Government to consider implementing a multi-year tax calendar for cigarettes, kretek cigarettes, cigarillos, and heated tobacco sticks with moderate and predictable tax increases to discourage consumers from turning to illicits cigarettes due to the unaffordability of legal cigarettes. This approach can generate additional excise revenue for the Government to achieve its fiscal objectives.