Unregulated nicotine vape threatens tobacco industry, says industry stakeholder

It is high time for the govt to consider regulating all the vape liquids


THE rising demand for nicotine-based vape liquid has been the latest threat to the tobacco sector as the volume of nicotine-based juice smuggled into Malaysia is currently equivalent to 12.5 billion cigarettes.

Japan Tobacco International Bhd (JTI Malaysia) MD Khoo Bee Leng said as the volume is almost double the number of legal cigarettes (6.3 billion sticks in 2020), the government should consider regulating all vape liquids.

“The government must look into taxing all liquids used for vaping that are sold in Malaysia as a source of additional revenues.

“At the moment, this growing category is not taxed which enables it to be sold at prices even below that of illicit cigarettes, thus eroding the recovery of the legal cigarette industry volume,” she said in the media briefing yesterday.

Last year, contraband cigarettes and vape liquids constituted 79% of the total market, equivalent to 23.6 billion cigarettes based on 1ml for 20 sticks conversion for nicotine-based vaping liquids, Khoo said.

JTI Malaysia corporate affairs director Shaiful Bahari Mahpar said should the government tax the nicotine-based vaping liquid at the rate of 40 sen per stick compared to 40 sen per ml as introduced in the national budget, the contribution of the vaping sector could surpass the revenue generated on the legal cigarettes.

“If the government taxes the vaping industry at the current rate of 40 sen per ml, which we think is not appropriate, the government would stand to gain roughly RM215 million.

“However, if it is closer to the excise duty on cigarettes, the government can gain up to RM5 billion, which is more than what legal cigarettes contribute annually,” he said.

On illicit cigarettes, contraband trades had dropped 6.2 percentage points to 57.9% from 64.1% in December 2020, according to the latest Illicit Cigarettes Study conducted by the Confederation of Malaysian Tobacco Manufacturers.

“This is the first time that the incidence of illicit cigarettes has decreased since 2015. The reduced incidence of illicit cigarettes is an early sign of improvement that can be attributed to policies announced during Budget 2021.

“These include halting the issuance of new import licences, tightening the renewal of import licences, limiting transhipment of cigarettes to five dedicated ports and imposing tax on the import of cigarettes with drawback facilities for re-export.

“The government must remain steadfast in its policies when facing opposition by parties with vested interests to have those policies revoked,” Khoo said.

She added that any widening of the price gap between the legal and illicit cigarettes, such as by a tax hike, will reverse the progress made in the first half of this year.

“In 2015, the government raised the tax on cigarettes that led to a 43% increase of illicit cigarettes and the incidence of illicit cigarettes in Malaysia has stood at over 50% since then.

“The first-time reduction in the incidence of illicit cigarettes should not be viewed as an opportunity to increase excise tax on cigarettes.

“It is important to note that the government’s overall revenue will automatically improve along with any recovery of legal tobacco industry volumes. This is a win-win situation for both parties and consequently for the nation, too,” Khoo said.