Malaysia

The latest in a string of nationwide studies of illegal cigarettes commissioned by the Confederation of Malaysian Manufacturers (CMTM) indicates that use of illegal cigarettes hit an all-time high of 37.3% in March-May 2011, compared to the average figure of 36.3% for 2010.
The study, conducted by The Nielsen Company (Malaysia) Sdn Bhd, shows a direct correlation of illegal cigarette use and increased taxation and concluded that Malaysia’s problem is getting worse in spite of law enforcement efforts. The increase in illegal cigarette consumption that comes on the heels of steep tax increases has already cost the local government RM2 billion (US$634 million) in annual excise tax revenue.
Illegal cigarette use in Malaysia is still among the highest in the world, and the tobacco industry has issued another appeal to the government to take a moderate approach to raising excise taxes.
“International experiences have proven that smaller and gradual tax increases will allow consumers to adjust to price changes, and are therefore less likely to fuel demand for illegal cigarettes,” according to William Toh, British American Tobacco (Malaysia) Bhd managing director, quoted in local media. “On the contrary, excessive tax increases cause significant price shocks to consumers who will then accelerate their purchases of cheap, illegal cigarettes as alternatives.”