Malaysia Suffers Combined Losses of RM10 Billion Annually to Illegal Cigarettes Despite Stronger Enforcement

Dato’ Fazli Nordin, Managing Director of Advokasi Perusahaan dan Industri.

KUALA LUMPUR, 13 February 2026 – The illicit cigarette trade continues to cost Malaysia an estimated RM10 billion annually, comprising approximately RM5 billion in uncollected tax revenue and a further RM5 billion in ongoing public expenditure to fund enforcement efforts to combat this persistent problem, said Advokasi Perusahaan dan Industri (API) today.

Remarks by Prime Minister Datuk Seri Anwar Ibrahim

API, an advocacy group dedicated to protecting the growth of businesses and industries, was responding to recent remarks by Prime Minister Datuk Seri Anwar Ibrahim, who observed that RM15.5 billion recovered through enforcement actions over the past two years may not fully reflect the true scale of public fund leakages, despite sustained enforcement efforts.

Dato’ Fazli Nordin, Managing Director of Advokasi Perusahaan dan Industri, said that the Prime Minister’s observation was accurate and highlighted a deeper structural issue.

Illicit Trade

“Recovery figures demonstrate strong enforcement capability. However, they reflect what is intercepted, not necessarily the full fiscal exposure created by illicit trade,” he said.

According to Dato’ Fazli, illicit cigarette consumption alone results in approximately RM5 billion in lost tax revenue each year, while legitimate manufacturers, distributors and retailers continue to face unfair competition from untaxed and unregulated products.

“In addition, federal allocations to the Ministry of Home Affairs amounted to RM19 billion in 2024 and RM19.5 billion in 2025. We estimate that, out of these allocations, approximately RM5 billion is spent each year to equip and train enforcement agents as well as to carry out counter-trafficking activities,” he said.

Losses in Lieu of Illicit Cigaretes

“We are basically throwing good money after a bad problem year in and year out. Spending RM5 billion if not more to recover RM5 billion doesn’t make sense,” he added.

“Beyond fiscal losses, illicit trade creates an uneven playing field for compliant businesses that fulfil their tax and regulatory obligations. It weakens market integrity, distorts pricing structures and undermines confidence in the operating environment,” he said.

He added that the issue extends beyond border smuggling alone.

“It involves adaptive supply chains, weaknesses in import controls and sustained retail availability. As long as illicit products remain significantly cheaper and widely accessible, enforcement alone will face inherent limitations.”

API acknowledged the vital role played by the Royal Malaysian Customs Department and other enforcement agencies in safeguarding national revenue and security.

“Enforcement agencies deserve recognition for their efforts. However, long-term success must ultimately be measured by whether illicit market activity is meaningfully reduced over time, not merely by the value of seizures recorded,” Dato’ Fazli added.

API reiterated its call for a more demand-focused strategy to tackle illicit trade, stressing that enforcement alone cannot resolve a market imbalance driven by persistent price gaps.

Addressing the structural drivers of illicit consumption, including pricing distortions, supply chain vulnerabilities and consumer incentives, is critical to restoring fair competition, protecting compliant businesses and strengthening long-term economic competitiveness.