‘Move likely to affect duty-free shops more than tourism industry’

Too quiet: Duty-free shops in Langkawi, reeling from the pandemic, may see a drop in business come Jan 1,2021.

IPOH: Tourism industry players in Pangkor believe the move to make cigarettes a taxable item on duty-free islands would largely affect duty-free shops but not so much the industry.

Resort manager Munir Shaari said the move would not be good news for duty-free shop operators as their businesses are expected to be affected.

“These businesses have only just started to pick up as Malaysians are allowed to travel locally again.

“I’m sure there will be an impact on the duty-free shops and maybe to a certain extent, some hotels.”

“Furthermore, it will also make new investors think twice whether to invest in a duty-free business, ” he said.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz had announced that the excise duty for cigarettes sold at duty-free islands would be on par with other cigarette taxes starting next year.

Pangkor had only become a duty-free island this year.

Cigarettes, along with chocolates and perfume, were among the items initially included in the duty-free list; alcohol is not on the list.

Munir said most shops and businesses throughout the country had already been impacted by the Covid-19 pandemic.

“We’ve already seen foot traffic at shopping malls and shops reduced, ” he said, adding that online shopping was the preferred option now.

“While tourists will still be coming to the island for their holidays and do a bit of shopping, those who look forward to buying cigarettes and tobacco will be slightly disappointed that they cannot buy it cheaper anymore, ” he said.

“I believe that cheap cigarettes is just an added bonus, not the main reason for people to go on holiday.”

Meanwhile, duty-free shop owner Shafiq Rashid said operators on the island were hoping that the Finance Ministry would talk to them to discuss the move further.

“If they take out cigarettes from the (duty-free) list, we’ll only have chocolates and perfumes and it will impact us.

“Unlike Langkawi, there’s no alcohol in our shops, ” he said, adding that cigarettes were the second bestseller at duty-free shops on the island while chocolates were the top.

Shafiq said the price of a carton of cigarettes containing 20 packs in duty-free shops ranged from RM45 to RM110.

“The price could shoot up to about RM200 if the tax is applied, ” he said.

“Most customers at our shop are from the Klang Valley and Perak as Pangkor is the nearest location for them to buy cheap cigarettes.”

“If the tax is implemented, there’ll be fewer things for tourists to spend their money on here, ” he added.

Meanwhile in LANGKAWI, its Business Association deputy president Datuk Alexander Isaac said the move would definitely affect the economy of the resort island.

“The number of tourist arrivals will be affected, especially domestic tourists as most of them buy cigarettes when they visit the island.

“Besides, Langkawi is very dependent on petty traders who sell cigarettes and other items.

“A lot of them who are villagers, grocers and small-time business operators will surely feel the pinch from the tax on cigarettes, ” he said.

Alexander said the government should leave Langkawi alone for its duty-free status. “It is OK if they want to do it on the mainland. It is wrong to implement it in Langkawi.”

Langkawi Chinese Chamber of Commerce chairman Lee Han Eng said the move would not help the already dying economy of the island.

“Instead of imposing a sin tax on this island, the government should help to promote the island better and improve its economy, ” he said.

He urged the government to help the tourism industry by relaxing some laws on duty-free items on the island.

In JOHOR BARU, the move to make cigarettes and tobacco products taxable goods at duty-free zones would not have much impact on the tourism industry and businesses.

Business and tourism groups said that while the move might hurt the tourism industry in certain places, especially on duty-free islands such as Langkawi, the impact would not be significant in Johor.

Johor Baru Chinese Chamber of Commerce and Industry president Low Kueck Shin said duty free zones in Johor did not cover a large area as in other states.

“The most well-known duty free zone for people to buy tobacco products in Johor is at the Stulang Laut international ferry terminal.

“Although shops in the area are already suffering as fewer people have been visiting since the movement control order started, I believe imposing tax on the cigarettes there would not make much of a difference, ” he said.

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