It’s yet another New Year full of hopes and aspirations. The arrival of 2019 has also ushered in a paradigm shift in law enforcement. Clamping down hard on illegal trade is one of the top agendas.

With the amended Customs Act 1967 and Excise Act 1976 coming into force beginning this year to curb cigarettes and liquor smuggling, offenders are staring at hefty penalties of a minimum fine of RM100,000 or minimum jail term of 6 months or both, if convicted. The previous light punishment of a minimum one-day jail term or/and RM1,000 fine or both, didn’t seem to alarm the smugglers, traffickers, suppliers and sellers of contraband cigarettes, for instance.

The crackdown on illegal cigarettes will certainly keep the Royal Malaysian Customs Department busy all year round. To yield the desired results, the department welcomes the cooperation and support from all parties especially the small store owners, the Health Ministry and the public, urged its director-general Datuk Seri T. Subromaniam.

Contraband cigarettes are widely sold across the country through sundries shops, kiosks or street peddlers, to name a few. Worse, Malaysia’s open and porous borders remain a big challenge for effective enforcement, not to mention retailers are motivated by the high profit margins.

“With harsher punishment in place, I believe the Royal Malaysian Customs Department will bring in more revenue as announced in Budget 2019 where the department has been tasked with making an additional collection of RM1 billion from the sale of legal cigarettes,” said Subromaniam, warning the small sundries stores not to risk it whether it’s just a pack or a carton of illegal cigarettes, considering the minimum fine will be RM100,000!

He also warned companies abusing their import licence as a camouflage for contraband will face serious consequences. “Companies with import licence for three years or more should import a minimum of 2.5 million sticks of cigarettes every quarter. For import licence of less than three years, the minimum import quantity is 1.25 million sticks every quarter,” he made it clear.

According to him, a total of 1,632 forwarding agents and 543 Customs shipping agents had their licences revoked as at 22 October 2018(1).

“Each year, Customs department would bring in about 2,000 cases of cigarettes smuggling to court but it was not a good effective deterrence. Now, with the amended acts in effect, let’s see who dares to sell,” he affirmed the warning(2), citing more than 50 such cases will be charged in court this month alone(3).

Illegal cigarettes are priced much cheaper at RM3 – RM5 per pack than legal cigarettes (RM12 – RM17.40). It is believed that contraband cigarettes make up some 60 per cent of the Malaysian market share, alarmingly. For your knowledge, the excise duty and sales and service tax cost about RM10 per pack.

Sadly, the easy access to illegal cigarettes and their affordability are contributing to the rise of the number of smokers especially the young ones in the country. And the health risks need no further explanation.

The Malaysian government may lose up to RM5 billion yearly in tax revenue if the rampant illegal cigarette trade is left unchecked, according to Finance Minister Lim Guan Eng during the tabling of Budget 2019(4). The government hopes to recover at least RM1 billion in tax losses through diligent enforcement. And in the face of bearing a RM1 trillion national debt(6). stepping up enforcement is the right thing to do.

The Oxford Economics report stated that the estimated tax losses to Malaysia due to illicit cigarettes consumption in 2016 and 2017 came to nearly RM9 billion!(7).

By tightening up the enforcement, Subromaniam said Customs department expects to collect cigarette duties up to RM4.6 billion this year as compared with RM3.6 billion last year. The department is also keeping a close eye on itself internally to combat power abuse and corruption among Customs personnel.

SUCCESSFUL RECENT RAIDS

• The Malaysia Border Security Agency (Aksem) raided a house in Taman Lavender, Alor Setar, Kedah and seized a few thousand cartons of contraband cigarettes worth some RM1.7 million in September 2018. There were no occupants at the time of the raid(8).
• Police raided a store in Kota Tinggi, Johor and seized 1,606 cartons of contraband cigarettes worth RM8 million in October 2018. Seven local men and 16 Indonesian nationals were arrested(9).
• The Royal Malaysian Customs Department arrested a local man and seized 6.4 million cigarette sticks worth RM4.6 million after impounding a container at Port Klang last November(10).
• Marine police arrested two men and seized illegal cigarettes worth RM1.39 million in a raid on a terrace house in Kulai, Johor last November(11).

DON’T RISK IT!

Once again, the trade of illegal cigarettes is a now a serious offence and punishable by law under Section 135 (1) (d) of the Customs Act 1967, and Section 20 (1) of the Excise Act 1976.

If you come across the selling of illegal cigarettes, please report it to the Royal Malaysian Customs Department at 1300 888 500 (Customs Call Centre), 1800 888 855 (Smuggling Report) or [email protected].

REFERENCES:

1. Customs DG: Heavier penalties await illegal cigarette, liquor traders, syndicates, BERNAMA via Malaysiakini, 11 December 2018.
2. Customs DG: Heavier penalties await illegal cigarette, liquor traders, syndicates, BERNAMA via Malaysiakini, 11 December 2018.
3. Sellers of contraband ciggies, liquor staring at hefty punishment, BERNAMA via The Sun Daily, 07 January 2019.
4. Guan Eng: More scanners at all entry points next year to combat smuggling, NST, 23 December 2018.
5. Focus on illicit cigarette trade in Budget 2019 welcomed, says BAT, The Edge Markets, 02 November 2018.
6. Lim confirms country’s debt exceeds RM1 trillion, The Star, 23 May 2018.
7. Asia Illicit Tobacco Indicator 2017: Malaysia, Oxford Economics, July 2018.
8. Ciggies and vehicles worth RM2.6mil seized, The Star, 03 Sep 2018.
9. Cops seize contraband cigarettes worth RM8m in Johor raid, The Malay Mail, 17 October 2018.
10. Customs seize RM4.6m in contraband cigarettes, The Sun Daily, 15 November 2018.
11. Johor marine police seize RM1.39 million worth of illicit ciggies in raid, NST, 22 November 2018.