The illegal trade in cigarettes has a considerable effect on the people and economy opf Malaysia.
Lost tax revenues
When the level of illegal cigarettes trade in Malaysia increased from 20 percent in 2002 to 34.5 percent in 2012, there was a corresponding reduction of 28 per cent in legal volume from 19.5 billion sticks in 2002 to14.1 billion sticks in 2012*.
This loss in legal volumes translates to a loss of tax revenues to the government estimated to be at least RM2 billion annually.
Effects on public health
Further, the illegal cigarette trade undermines public health initiatives to curb tobacco consumption because it makes tobacco very accessible at extremely low prices. Unlike legal cigarettes which are manufactured and sold in compliance with strict government regulated requirements such as depicting graphic health warnings, abiding by the Minimum Cigarette Price at retail and complying with maximum tar and nicotine levels, illegal cigarettes blatantly disregard such regulations.
Also, the illegal cigarette trade encourages criminality, social ills and possible funding of terrorism activities, as widely reported by the international media**.
* Based on the Confederation of Malaysian Tobacco Manufacturers (CMTM) member companies’ excise paid volume which represents an estimated 90% of total legal market. CMTM represents the 3 main tobacco companies in Malaysia - British American Tobacco (Malaysia) Berhad, JT International Berhad and Philip Morris (Malaysia) Sdn. Bhd.
**Tobacco Underground, Special Report by The Centre for Public Integrity
**”Illicit Trade: A Security Challenge – A Case Study of Cigarette Smuggling” Dr. Louise Shelley, ITIC Conference Paper, 2009