The overall progress of tobacco tax policy implementation:
- Relationship between tobacco taxes, price and public health
Tobacco tax as percentage of retail prices in Malaysia is 58.60%. The country does not have regular adjustment process or procedure to periodic revaluate of tobacco tax. Tobacco tax rate was previously increased in September 2014. In April 2015, the government implemented Goods and Service Tax (GST), and later in September 2018 GST was replaced by Sales and Services Tax (SST) in which 10% was applied on tobacco products. As a result, cigarettes have minimal price increase. Although Malaysia conducted cigarette affordability studies before raising taxes, the tax increase rates do not reflect the income and inflation rate of the country.
- Level of tax rates to apply
Malaysia applies a specific tax rate of MYR 0.40/ stick on cigarettes. The last tax increase was in 2014. It increased 12% of excise duty from the previous tax rate. Although the tobacco tax and price is high in Malaysia compared to other ASEAN countries, the tobacco tax rate should be adjusted annually to keep up with the inflation rate in the country. In addition, there is no long-term tobacco tax policy, and increases have been small and ad hoc, such that cigarettes continue to be affordable, contributing to a very small reduction in smoking prevalence over the past 2 decades, though the tobacco tax system was shifted from mixed system to specific system in 2016.
- Comprehensiveness/similar tax burden for different tobacco products
The government does not tax all tobacco products in a comparable way. The new and emerging products such as e-cigarettes, the tax rate of 10% of the retail price is imposed and a specific tax of RM 0.40 per millimeter of electronic cigarettes liquid from January 2021, onwards.
- Authorization/licensing
Malaysia requires licenses for: manufacture of tobacco products under the Regulation 3 of the National Kenaf and Tobacco Board Regulations 2011, and manufacturing equipment is license under the Malaysian Investment Development Authority (MIDA); importing or exporting of tobacco products under the Customs Regulations 2007 and importing of manufacturing equipment under the Malaysian Investment Development Authority (MIDA); growing of tobacco, except for traditional small-scale growers, farmers and producers and transporting commercial quantities of tobacco products or manufacturing equipment; and wholesaling, brokering, warehousing or distribution of tobacco and tobacco products or manufacturing equipment under the Regulation 3 of the National Kenaf and Tobacco Board Regulations 2011. Malaysia does not require licenses for retailing of tobacco products.
- Warehouse system/movement of excisable goods and tax payments
The government imposes excise taxes at the point of manufacture and importation. The tax payments are required to be remitted at fixed intervals. The tax payments include the reporting of: production and/or sales volumes by brands, price by brands, taxes due and paid, and. volumes of raw material inputs. Tax authorities do not allow for the public disclosure of the information contained within the reports, through the available media, including those online. This is because the Inland Revenue Board of Malaysia protects the tobacco industry information according to the Personal Data Protection Act 2010 and Income Tax Act 1967. However, the information can be released with the approval of the Minister of Finance under the Income Tax Act 1967.
- Anti-forestalling measures
Malaysia do not apply anti-forestalling measures.
- Fiscal markings
The Royal Malaysian Customs imposed tax stamps for both domestic and imported cigarette and removed security ink fiscal markings in 2017. The imposed tax stamps are not part of a track and trace system to secure the supply chain of tobacco products.
- Enforcement
The Royal Malaysian Customs is the main enforcement authority, it designates and grants appropriate powers to other tax enforcement authorities. There are various committees formed under enforcement agencies for information sharing. In terms of deterring non-compliance with tax laws, the Customs Act 1967 provides clear provisions to penalize tax evasion or non-compliance.
- Use of revenues – financing of tobacco control
Malaysia does not have a regulation to dedicate tobacco tax revenue to tobacco control programs, such as those covering awareness raising, health promotion and disease prevention, cessation services, economically viable alternative activities, and financing of appropriate structures for tobacco control. However, the source of funding for tobacco control activities is from the Treasury Budget, estimating at MYR 5 million annually which is a sustainable source of funding from the government budget.
- Tax-free/Duty-free sales
Malaysia restricts the sale to and/or importation by international travelers, of tax-free or duty-free tobacco products. On 1 January 2021, excise taxes are applied for all tobacco products in duty free zones.
- Protection of tax policies from vested interests
Malaysia does not have a written document or guidelines for government officials in interacting with the tobacco industry. Nonetheless, the country does not consult tobacco companies or their front groups in a non-transparent manner (e.g. private/non-public consultations) or accept policy/legal drafts from them.