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Tobacco Tariff
July 3, 2007

Higher tax benefits smugglers
British American Tobacco Malaysia Bhd (BAT Malaysia) contended today that the increase in excise duty on cigarettes effective yesterday will encourage smokers to turn to smuggled cigarettes.

Its managing director Jack Bowles protested that the excise tax is almost 300% higher than three years ago.

In that period, illicit trade rose from 14% to 25%, which is an all time high and is trending higher, meaning that one in every four cigarettes sold is illegal, he said in a statement.

Yesterday, the Finance Ministry announced an immediate increase in the excise duty on cigarettes from 12 sen per stick to 15 sen, with the duty for a 20-stick pack increased by 60 sen.

"BAT Malaysia supports the government's drive to achieve its health agenda to make cigarettes less affordable via price and taxation measures. As such, we have always advocated that there should be moderate and gradual tax increases," he said.

"Sporadic and high tax increases will only fuel the illicit trade which is proven to be counterproductive to achieving the government's health objective of reducing cigarette consumption, as more consumers turn to illegal and exceptionally low priced cigarettes."

And that, Bowles argued, leads only to further losses in tax revenue of about 960 million ringgit to 1.4 billion ringgit for the government.

He said that while BAT is encouraged by the increased efforts by the authorities, especially the Royal Malaysia Customs, to clamp down on the illicit tobacco trade, yet another high increase in tobacco taxation will make their job tougher.

"The tobacco industry remains committed to continue working with the relevant authorities on measures to address this serious issue," he said.

Bowles said following the excise duty increase, BAT will revise the retail prices of cigarettes and this will be announced this week. Bernama

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