PETALING JAYA (Sept 30, 2013): British American Tobacco Malaysia (BAT), which holds a 63% share of the local cigarette market, is shocked over the increase of tobacco excise by 14%, calling it excessive and a move that will play directly into the hands of criminal syndicates of illegal cigarettes trade.
The cigarette maker said in a statement yesterday, the excise price increase will put considerable stress on disposable income and exacerbate rising cost of living, especially after the recent hike in petrol prices and inflation.
BAT managing director Stefano Clini said, "This announcement is indeed shocking and disappointing. The industry is not opposed to excise increases and has always advocated for a moderate and gradual approach, precisely to avoid the current situation of a sudden and huge excise hit after 2 years of no excise increases.
"Such a move will exacerbate the already high levels of illegal cigarettes in Malaysia and dampen all efforts that have been taken thus far to address this national scourge."
BAT will increase prices of all its cigarette brands today (Sept 30, 2013). The quantum of the increase was not stated.
In June this year BAT had announced a 3% increase in cigarette prices citing rising operating costs.
BAT's brands include Dunhill, Pall Mall, Kent and Peter Stuyvesant.
The company's pricing decision took into account the loss of legal volumes due to illegal cigarettes, consequential loss of industry's and retailers' margins and ongoing inflationary pressure.
"We have been operating at optimal cost efficiency and increased our export volumes by expanding contract manufacturing over recent years to sustain returns to investors. In spite of these measures, we will be hard pressed to counteract our loss of returns due to volumes lost to illegal cigarettes and this drastic excise increase will further compound our losses. As such, it has left us with no choice but to take a significant price increase." Clini added.
The statement said the illegal cigarette trade will be given second wind to surge ahead to the detriment of legal volumes, as the price shock will drive consumers to switch to cheaper and wide available illegal alternatives.
"In fact, a far more sustainable method to increase government revenue than increasing taxes drastically would be to give top priority to tackling the illegal cigarette trade," BAT said.
It said about RM2 billion in revenue is lost to illegal cigarettes.
"Hopefully the government will enhance its enforcement efforts and seriously consider deploying more deterrent laws such as mandatory imprisonment for dealing in illegal cigarettes, to curb the growth of this national scourge," BAT said - The Sun Daily