Magnitude of Illicit Cigarette Trade in Malaysia: Empirical Evidence Compared with Industry Studies
The tobacco industry contends that the illicit market in Malaysia occupies 62.3% of the total cigarette market. If this is true; Malaysia has one of the largest shares of illicit cigarettes in the world.
This study employs a rigorous gap analysis to measure the size of the illicit cigarette trade in Malaysia and compare it with industry estimates.
We found that in 2019; the illicit cigarette market share ranged from 38.2% to 52.5%; depending on assumptions with respect to consumption under-reporting; which is substantially less than the industry estimates. We found that the size of the illicit cigarette market was not driven by higher excise tax: doubling the excise tax rate from RM0.20 to RM0.40 per stick in November 2015 resulted in only a slight increase in the illicit cigarette market share and no increase in the number of illicit cigarettes in the market.
Therefore; a reduction in cigarette excise taxes; as suggested by the industry; will not solve the problem of the illicit cigarette trade in Malaysia. Instead; the government should ratify the Framework Convention on Tobacco Control’s Protocol to Eliminate Illicit Trade in Tobacco Products and implement the strategies outlined in the protocol.
Bui, W.K.T., Ross, H., & Mohamed Nor, N. (2022). Magnitude of illicit cigarette trade in Malaysia: empirical evidence compared with industry studies. Tobacco Control. Advance online publication. https://doi.org/10.1136/tc-2021-057210