Malaysia could lose RM1b tax revenue from vape products


MALAYSIA could lose an estimated RM1 billion tax revenue from vape products now that the Tobacco and Smoking Control Bill is delayed.

Pankaj Kumar, Managing Director of DARE said the government need to make regulatory changes immediately to tax and regulate vape products especially e-liquids containing nicotine.

“The delay in tabling the Tobacco and Smoking Control bill will cost the government RM1 billion in uncollected tax revenue. This situation cannot remain as the Government not only loses revenue but is also seen taking no action to protect consumers who continue purchasing unregulated vape products,” he said in a statement yesterday.

Last year, the Finance Minister announced tax on e-liquids containing nicotine in Budget 2022 to start 1 January 2022 at RM1.20 per milliliter. However, the implementation has been delayed pending the tabling of the Tobacco and Smoking Control bill in the Parliament.

According to Pankaj, the health ministry has given an indication that the bill may be delayed.

“Now that the bill is delayed, a solution is for the Health Ministry to use its powers under existing laws to introduce regulations or guidelines on vape products. That way the Health Ministry can ensure the products are regulated with safety and quality standards. More importantly, the government can also start collecting taxes,” he said.

Pankaj proposed the government to have a taxation system that encourages smokers to switch.

“The taxation on vape products ought to be risk-proportionate to encourage smokers to switch to vape and quit smoking. The RM1.20 per millilitre excise duty as announced under Budget 2022 by the Finance Minister is rather too high and effectively will make vape more expensive than cigarettes,” he said.

“This defeats the purpose of using the product as a strategy to reduce smoking prevalence.”

While the move to introduce excise duties for nicotine-based liquids is a step in the right direction to regulate all vape products, the excise duty that is three times more than the previous rate is excessive and not proportionate to the lower risk profile of vape products.

“By applying the risk-proportionate principle, the excise duty that is levied on vape liquids ought to be lower”.

DARE’s “Clearing the Smoke: Tobacco Harm Reduction – A Game Changer For Malaysia’s Smoking Issues” report, published in January 2022, highlighted the need for the government to adopt a Tobacco Harm Reduction strategy which will help not only reduce smoking prevalence in the country but also help to reduce healthcare cost associated with it.

“Malaysia’s healthcare cost related to smoking can be reduced by up to 18% or RM1.33 billion in 2025 on the assumption that there is between 2.9% and 4.5% reduction in smoking prevalence between 2021 and 2025” Pankaj concluded.