RM5 billion lost annually to illicit cigarette trade
PETALING JAYA: Malaysia incurs significant losses from the rampant trade in illicit cigarettes, with an estimated RM5 billion in tax revenue lost annually, according to the latest NielsenIQ Illicit Cigarettes Study released in March.
The study found that illegal cigarettes make up 54.6% of all cigarettes sold in the country, highlighting the size and strength of the black market.
The widespread trade not only deprives the government of crucial revenue but also undermines national public health efforts.
A key finding was the dominance of 10 leading contraband brands, which together account for roughly 75% of all illicit cigarettes smuggled into Malaysia.
The brands are identified as primary contributors to ongoing tax leakage.
The report also flagged serious concerns over tax stamp fraud.
It revealed that 69% of illegal cigarette packs carried no tax stamp at all, while 31% bore counterfeit stamps – indicating growing sophistication among smuggling syndicates.
As of March, fake tax stamps were found on 16.7% of seized illicit packs, up from 15.6% in May 2024.
This rising trend suggests that criminal networks are becoming increasingly adept at circumventing enforcement and exploiting weaknesses in the regulatory system.
In addition, the top 10 brands found with counterfeit tax stamps did not overlap with the top 10 most consumed contraband brands, suggesting a wider and more complex illicit trade network than previously understood.
Johor, Selangor and Sabah were identified as key hotspots for smuggling activity.
The states serve as major entry and distribution points for illegal tobacco products and represent a large proportion of national cigarette consumption, making them critical targets in enforcement efforts.
Despite the scale of the issue, the study noted slight progress.
The prevalence of illicit cigarettes fell by 0.2%, from 54.8% in January 2024 to 54.6% in March this year.
This modest decline is attributed to continued enforcement by the authorities.
The study also highlighted a longer term downward trend, with the rate of illicit cigarette consumption dropping steadily since peaking at 63.8% in 2020.
The improvement is credited to stronger enforcement and the ban on trans-shipment of tobacco products.
A significant breakthrough in the fight against the trade occurred on March 5, when Johor Customs intercepted a major shipment at the Port of Tanjung Pelepas.
Officers discovered more than six million contraband cigarettes concealed among 444 pieces of plywood in a 40-foot container.
The shipment had been falsely declared in Customs documentation as 'other plywood, consisting solely of sheets of wood'.
The seized items were valued at RM1.61 million, with unpaid duties estimated at
RM4.58 million.
The case is being investigated under Section 133(1)(a) of the Customs Act 1967 for false declaration.
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