BAT Hopes There Won't be A Sudden Spike in Excise Duty

Source from:  The Star 09/30/2010

PETALING JAYA: British American Tobacco (M) Bhd (BAT Malaysia) hopes the upcoming Budget 2011 will continue to reflect a balanced, moderate and gradual excise increase regime as the previous year. BAT Malaysia managing director William Toh said a sudden spike in excise duty would only serve to fuel the smuggled and illicit cigarette trade further. "The illicit cigarette trade in Malaysia has increased from 14.4% in 2004 to the current level of 37.5% and will likely continue to increase further due to tax-led and wide price gap increases between legal and illegal cigarettes," Toh said at a media briefing and plant visit yesterday. He said the burgeoning black market had become a daunting challenge for the tobacco industry. He said currently two out of five cigarettes sold in Peninsular Malaysia were in the category of smuggled or illicit cigarettes and in Sabah and Sarawak, about 75% of all cigarettes sold were illegal. "It (smuggled and illicit cigarette trade) is a lucrative billion-dollar trade that deprives the Government of much needed tax revenue, impacts legitimate tobacco industry players and undermines the health agenda," Toh noted. He said BAT Malaysia was not opposed to excise duty increases but the company advocated a moderate and gradual taxation approach. Toh also said the recent announcement of the possible implementation of cess (a form of indirect tax) on tobacco products by the National Kenaf and Tobacco Board, which is on top of excise and sales taxes, would only serve to further fuel the smuggling of illicit cigarettes into the country. "As such, we hope the Government will take into consideration the impact excise duty or any additional tax on cigarettes will have on the illicit cigarette trade and the consequent adverse effects on legitimate tobacco players," he said. Toh also said the idea of licensing cigarette retailers by the National Kenaf and Tobacco Board would be counter productive and would not help to reduce illicit trade. He said that while the enforcement authorities were doing a good job in containing illicit cigarette trade, BAT Malaysia, as an industry player, would like to see a more holistic approach to combating the illegal trade through stricter penalties to illicit cigarette traders. Interestingly, according to Euromonitor, Goldman Sachs Research 2009 estimates Malaysia now tops the list in illicit cigarette trade in the world, above China and Brazil. Enditem