Tax will hit Labuan’s duty free status, say traders

KOTA KINABALU: Labuan businesses are appealing to the government to put on hold plans to impose duties on tobacco products as it will further strangle the economy of the duty free island.

Stakeholders in the Federal Territory said that businesses have already been struggling for years now and the duty free status was the only draw left for tourists to come to the island, an international offshore financial centre.

“The imposition of duties on tobacco is going to hit both big and small businesses. The government must not rush into it.

“Businesses in Labuan have been slowing down over the years. Imposing duties on tobacco products will hit us further as many are already suffering from the effects of the Covid-19 pandemic, ” said Labuan Chinese Chamber of Commerce chairman Datuk Wong Kii Yii who wants the government to rethink its decision.

He suggested that the government set a quota for the import of tobacco products that will be tax free and any further imports on the set quota be subjected to duties.

Labuan Indian Chamber of Commerce and Industry president Datuk Dahlif Singh said that the duties on tobacco products should not be implemented as it would further harm the economy of the island.

“The Finance Ministry’s reasoning is that they want to curb smuggling due to losing revenue. We are all licensed businesses and all our trade is on record, ” he said, adding it was unfair to blame genuine businesses for smuggling activities.

“Equating the genuine businesses with smuggling activities is wrong. Those involved in smuggling are elsewhere and it is up to the government to strengthen the enforcement, ” he said, adding that duty free status of goods gave the island an economic edge to draw tourists.

Visitors to the island are allowed to buy duty free goods worth RM1,000 and tobacco as well as alcohol products were limited, he said.

Local importer of tobacco products Arthur Kong said that the government was unlikely to get desired results if it looked at revenue from tobacco products on the island.

“What will happen is that the sales of tobacco products will drop as visitors from outside the island would not bother buying it as it will be the same price as the rest of the country.

“I believe smuggling will become more rampant and our Malaysian tobacco manufacturers will lose out more to foreign brands as smugglers will be bringing in foreign brands which could be cheaper, ” he said.

He said that many of these foreign brands were already being smuggled in and sold widely in the country.

Labuan businesses have been complaining about years of dwindling economic spinoffs especially after the oil and gas industry slowed down in recent times.