Counter-productive to tax cigarettes in duty-free tourist areas

LANGKAWI: A hospitality industry body today urged the government to reconsider the proposal to impose taxes on cigarettes and tobacco products sold in all duty-free islands.

The Langkawi Chapter of the Malaysia Budget Hotel Association (MyBHA) said placing excise tax on cigarettes will likely deprive budget hotel proprietors as well as retailers operating in these duty-free zones an important source of income.

In addition, making cigarettes more expensive may incentivise criminal syndicates to bring in contraband cigarettes that target both locals and tourists. This may lead to negative socio-economic consequences that are associated with the illegal cigarettes trade.

“Most of our members have retail outlets or convenience stores operating within their properties. By imposing tax on popular consumables, sales volume and revenue will surely drop,” MyBHA (Langkawi Chapter) chairman Datuk Noorazly Rosly said.

“Budget hotel operators are already pushed to near closure as a result of the global Covid-19 pandemic. Every single source of direct and indirect revenue is precious.

“It is our hope that the government will not impose tax that will add to their hardship but instead introduce initiatives that will help our members survive this ordeal, and eventually contribute to the economic growth of duty-free islands.”

Noorazly also said illegal cigarettes have never been a significant problem in duty-free islands like Langkawi.

“Why would one buy contraband products when the legal products cost the same?”

“Imposing a tax on cigarettes in these islands means creating an entirely new and virgin market for illegal cigarettes syndicate. Given the current challenging operating landscape, we cannot afford to lose tourist arrivals because of unwholesome perception and experience,” he added.

In his recent Budget 2021 speech, Finance Minister Datuk Sri Tengku Zafrul said that taxes would be imposed on cigarettes and tobacco products on all duty-free islands and any free zones that have been permitted retail sales of duty-free cigarettes.