Prices of cigarettes to go up after sales tax fixed at 10%

Tobacco companies have been undergoing a major shift as they try to lower their reliance on traditional cigarettes, seeking a future with alternative products as smoking demand wanes and countries tighten regulations.

PETALING JAYA: Sales and Service Tax (SST) for cigarettes has been gazetted at 10% as of Aug 29, and this will cause the prices of cigarette to increase.

British American Tobacco (M) Bhd (BAT) managing director Erik Stoel said the company is concerned about the impact that the 10% SST will have on the cigarette industry, given the high incidence of illegal cigarettes.

He urged the Government to re-consider an SST increase on tobacco products "in light of these high levels of illegal cigarette trade and the persistent pressure on disposable income for the average Malaysian consumer".

"For the tobacco industry, a SST of 10% is higher than the previous 6% GST (goods and service tax). "Furthermore, this implies a double taxation as the SST will be levied inclusive of the high levels of excise, which we currently contribute to the Government," he said in a statement on Friday.

He said that this will unfortunately leave the company no other choice but to consider increase of prices for consumers.

"We are concerned that this could further fuel the growth of illegal trade in Malaysia.

"The legal cigarette industry is under tremendous pressure and has never recovered from the unprecedented excise tax hike of close to 40% way back in November 2015, which increased cigarette prices to the existing high prices compared to illegal cigarettes," he said.

As a consequence, Stoel said that sales volumes of legal cigarettes 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'".

"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," he said.