A STUDY by the Health Ministry and Universiti Putra Malaysia (UPM) on tobacco taxation has proposed an increase of 60 per cent in excise tax to raise the average price of a cigarette pack to RM21.80, to generate maximum real excise tax revenue of RM6.3 billion per year.
Lead researcher of the study health economist Dr Norashidah Mohamed Nor said: “The study projected that if the government increases its tobacco tax to 73 per cent of the average retail cigarette price, Malaysia would be able to reduce smoking prevalence to 15 per cent by 2025 while reducing the number of smokers by about 2.6 million by 2055 and averting almost 1.3 million premature tobacco-related deaths.”
This, she said, would require an increase of tobacco tax by 163 per cent.
“If this tax is fully passed on to consumers, the average cigarette price would increase from RM17 to RM29.40, or by 73 per cent. However, if we increase the tax to more than 60 per cent, it will lead to revenue of about RM4 billion.
“As economists, we look at both sides of the coin. To achieve reduced smoking prevalence and increase revenue, an increase of 60 per cent excise tax is the optimal rate.”
The UPM Faculty of Economics and Management senior lecturer said enhancing the implementation and enforcement of a set of non-price policies should also be carried out simultaneously.
On the endgame target of five per cent smoking prevalence by 2045, Norashidah said it could be achieved with a 556 per cent tax increase accompanied by a similar set of non-price interventions.
“Even though the proposed tax increase may appear substantial, they are not unprecedented. Ukraine, for example, increased its excise tax by 500 per cent in just two years, from 2008 to 2010.
“In 2013, the Philippines increased its excise tax rate by 341 per cent on low-tier cigarettes. Both countries achieved a substantial reduction in smoking prevalence and a substantial increase in excise tax revenue.”