MALAYSIA
Malaysia’s Institute for Democracy and Economic Affairs (IDEAS) estimates the government is losing about MYR8 billion in tax revenue annually due to the black market, which looks to be thriving particularly in the tobacco, food and beverage, and motor vehicle industries.
The think tank’s estimates are based on previous academic studies on the subject as well as MYR4.4 billion tax revenue losses recorded from the illicit tobacco market last year.
Tax revenue losses from the tobacco industry accounted for 56% of the computed figure, followed by 24% from food and beverage, 17.8% from motor vehicles, and 2.2% from non-electrical machinery (2.2%).
Ali Salman, IDEAS research director, said high taxes on tobacco and alcohol products has led to Malaysia being a fertile breeding ground for the proliferation of illicit products. “Measures such as price control and anti-profiteering is not helping businesses,” he said. “Government should see the market and encourage more supply.”
Salmon also said that there is a need for a multi-agency committee from a few ministries to be set up to combat illicit trade and the shadow economy, as well as that there should be more market-based approaches and engagement between industry players and the government to come up with solutions to combat illicit trade.
IDEAS’ study also suggested the use of technical solutions such as holographic devices to authenticate products and to prevent counterfeits.