KUALA LUMPUR: The government's tighter enforcement to combat the sale of illicit cigarettes mentioned in the 2021 Budget will improve revenue collection of high duty goods.
Industry experts said Malaysia suffer losses about RM5 billion in revenue annually due to the trade activity of illicit cigarettes in the country.
Thannees Tax Consulting Services Sdn Bhd managing director Thanneermalai Somasundaram said the government has listened to the tobacco industry by addressing the illicit cigarette trade under the 2021 Budget.
"Transshipment is one of the biggest leakages. It is good for the government to limit transshipment of cigarette to dedicated ports," he told the New Straits Times (NST).
He said the government's imposition of 10 per cent excise duty on devices for all types of electronic and non-electronic cigarettes including vape effective from January 1, 2021 would add additional cost to consumers.
"Although most people will be unhappy and in fact welcome the imposition of excise duty for electronic cigarettes, the move discourages them to smoke electronic cigarettes," he said.
Ernst & Young Tax Consultants Sdn Bhd tax leader for Asean and Malaysia, Amarjeet Singh said the government has taken concrete steps to prevent the loss of tax revenues through illicit trade and the black economy.
"This is particularly targeting contraband cigarettes, with measures such as limiting trans-shipment activities to certain ports and imposing tax on cigarettes and tobacco products at duty-free islands," he said.
Wong & Partners Tax, Trade and Wealth Management Practice partner Yvonne Beh said the government was expecting a revenue of RM236.9 billion, while indicating the revenue collection strategies will be enhanced, especially in tackling the smuggling of high value goods.
"The addition of the Malaysian Anti-Corruption Commission (MACC) and the National Anti-Financial Crime Centre (NAFCC) to the Multi-Agency Taskforce, points to the likelihood of increased tax and customs audits and enforcements, in order to boost tax collections amidst the Covid-19 induced slowdown for businesses," she said.
Tricor Malaysia chairman Dr Veerinderjeet Singh said the government's move to tax goods in all Duty-Free Islands and any free zones would curb certain quarters activity of abusing the tax exemption.
"The withdrawal of exemption from excise duty on goods in tax-free island is a bold initiative and it should have been done much earlier," he told NST.
He said duty-free island was a source of leakage of revenue as smuggling activity also happens in the area.
"The next step is to re-impose excise duty on liquors at duty-free island. The whole objective is to curtail smuggling and to prevent the use of illicit products," he added.
Meanwhile, Malaysian Vape Chamber of Commerce president Syed Azaudin Syed Ahmad said it would be easier for the government to regulate illegal vape that are hazardous and did not follow industrial standards.
"A lot of vape businesses complain about parties that are selling vape products irresponsibly. We appreciate the law where finally vape is being regulated significantly.
"However, we hope the law would evolve from time to time to make sure the vape industry in Malaysia maintains its competitiveness," he told NST.
He said the taxation on electronic cigarettes was the first step in the right direction to introduce appropriate regulation on the vaping industry.
"The next step is to develop a clear and holistic regulation for the industry to enable the industry to operate with a clear direction," he added.