Govt losing RM8b a year in tax revenue from illicit trade : IDEAS

KUALA LUMPUR: The Institute for Democracy and Economic Affairs (IDEAS) estimates the government is losing some RM8 billion in tax revenue annually due to the black market, which looks to be thriving particularly in the tobacco, food and beverage and motor vehicle industries.
A roundtable with the authorities and industry players today to gain feedback and formulate a way forward to combat the illicit goods market highlighted the growing number of contraband beers in the Sabah and Sarawak market, the infringement of copyrights and threats to intellectual property especially through digital channels.
A common solution mooted by participants was for more government intervention in policing and enforcement of laws.
The think tank’s estimates are based on previous academic studies on the subject as well as RM4.4 billion tax revenue losses recorded from the illicit tobacco market last year.
Apart from the tobacco industry, these losses also are from the black markets of the food and beverage, motor vehicle and non-electrical machinery segments.
The tax revenue losses from the tobacco industry accounted for 56% of the computed figure, followed by F&B (24%), motor vehicles (17.8%) and non-electrical machinery (2.2%).
IDEAS research director Ali Salman said high taxes on tobacco and alcohol products has led to Malaysia being a fertile breeding ground for the proliferation of illicit products.
“Measures such as price control and anti-profiteering is not helping businesses. Government should see the market and encourage more supply,” he said adding that these policies have also become a bane for businesses.
Ali noted that there is a need for a multi-agency committee from a few ministries to be set up to combat illicit trade and the shadow economy. He also noted that there should be more market based approaches and engagement between industry players and the government to come up with solutions to combat illicit trade.
The study also suggested the use of technical solutions such as holographic devices to authenticate products and to prevent counterfeits.