PETALING JAYA: British American Tobacco (BAT) Malaysia has increased prices of its cigarette range following a 14% increase in excise duty, the biggest single hike in recent years.
The price of a pack of 20s will go up by RM1.50 to RM12 from Monday.
BAT Malaysia managing directive Stefano Clini said the increase in duty was shocking and could lead to an increase in illegal cigarette trade.
"This announcement is indeed shocking and disappointing.“The industry is not opposed to excise increases and has always advocated a moderate and gradual approach, precisely to avoid the current situation of a sudden and huge excise hit after two years of no excise increases,” he said in a statement.
He added that such a move would exacerbate the already high levels of illegal cigarettes in Malaysia and dampen all efforts that have been taken thus far to address the problem.
The statement said BAT Malaysia had also announced an increase in prices of all its cigarette brands effective today.
It said the company’s pricing decision took into account the loss of legal volumes due to illegal cigarettes, consequential loss of industry’s and retailers’ margins and ongoing inflationary pressure.“We have been operating at optimal cost efficiency and increased our export volumes by expanding contract manufacturing over recent years to sustain returns to investors.
“In spite of these measures, we will be hard pressed to counteract our loss of returns due to volumes lost to illegal cigarettes and this drastic excise increase will further compound our losses. As such, it has left us with no choice but to take a significant price increase,” said Clini.
BAT Malaysia also suggested that to increase their revenue the government should combat the illegal cigarette trade first rather than increasing taxes dramatically.
According to BAT, approximately RM2 billion in revenue is lost due to illegal cigarettes.
BAT is hopeful that the government will enhance its enforcement and seriously consider deploying more deterrent laws such as mandatory imprisonment for dealing in illegal cigarettes.
BAT shares surged RM1.98 to RM64.48 at 3.52pm as funds supported the stock after it fell to a low of RM62.20 after the 14% hike in excise duty.