The Budget 2021 saw the government move to tackle the sales of illegal cigarettes in the market by strengthening its import activities of high-duty goods, coupled with the introduction of ad valorem 10% excise duty on devices for all types of electronic cigarettes (e-cigarettes) and non-e-cigarettes-inducing vapes.
KPMG Malaysia head of tax Tai Lai Kok told TMR that while taxing the e-cigarettes could result in a streamlined industry, a rise in retail prices could also result in illegal trading as observed in the tobacco industry currently.
“The topic of taxing e-cigarettes and non-e-cigarettes has been around for several years. Proponents would argue this will streamline and regulate the entire cigarette industry, putting all players on a level playing field while generating additional revenue for the government.
“But, if the prices of the regulated e-cigarettes become too expensive, the concern will be whether this will lead to the emergence of illicit trade as can be seen in the traditional cigarette industry,” he said.
The new excise duty also poses an immediate challenge of product classification according to the relevant legislation and orders including businesses along the supply chain who are subjected to the duty, Tai said.
Read the full article published in The Malaysian Reserve.
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