’10 per cent SST on BAT’s range of cigarettes will force more smokers to buy contraband variety’

British American Tobacco Malaysia

KUCHING, Sept 2: The Sales and Services Tax (SST) for cigarettes has been gazetted at 10 per cent for all British American Tobacco (BAT brands), and this is, unfortunately, ‘good news’ for illegal trade in the country, said the manufacturer.

The gazette took effect on Aug 29 this year, and as a result, it has made BAT cigarettes dearer.

In a press statement today, BAT Malaysia managing director Erik Stoel said they were concerned about the impact the 10 per cent SST would have on the legal cigarette industry, given the high incidence of contraband (close to 60 per cent of total consumption).

“In light of these high levels of illegal cigarette trade and the persistent pressure on disposable income for the average Malaysian consumer, we have urged the government to re-consider an SST increase on tobacco,” Stoel said.

For the tobacco industry, a sales tax of 10 per cent is higher than the previous six per cent GST.

This implies a double taxation as the SST would be levied inclusive of the high levels of excise, which BAT currently contribute to the government.

“Unfortunately, this will leave us no other choice but to consider an increase of the consumer price to reduce the estimated negative impact on our business performance and to compensate for the differential in tax between SST and GST. We are concerned that this could further fuel the growth of illegal trade in Malaysia,” Stoel lamented.

According to BAT, the legal cigarette industry is under tremendous pressure and had never recovered from the unprecedented excise tax hike of close to 40 per cent in November 2015, which increased cigarette prices to the existing high prices compared to illegal cigarettes.

As a consequence, it is a known fact that legal volumes have declined significantly and has made Malaysia a very attractive hunting ground for smugglers and all sorts of criminal elements that should not be associated with a respectable ‘new Malaysia’.

Since the significant 2015 excise increase, Stoel said the industry had made conscious efforts not to pass on inflationary cost and other associated costs to adhere to tobacco regulations in Malaysia and to prevent putting further pressure on consumer affordability.

Now, as a result of the tax increase, BAT is required by law to revise the cigarette prices.

“This price increase will result in higher disparity between legal and illegal cigarette prices, in absence of any effective government solutions to curb illegal cigarette trade in Malaysia. Like all Malaysian citizens we were encouraged by our new government’s manifesto, including clear commitment to address illegal cigarettes and corruption in the system.

“Based upon this promise, we urge the government to put in place rapid and drastic interventions to address this massive national issue.” — DayakDaily