KUALA LUMPUR – Putrajaya should consider progressively increasing sin tax rates on a scheduled basis to replenish the nation’s coffers while simultaneously improving social welfare, said a Bersatu lawmaker.
According to Tasek Gelugor MP Datuk Wan Saiful Wan Jan, sin tax is a “low-hanging fruit” that the government should endeavour to tackle in Budget 2025, to be tabled in Parliament on October 18.
“It’s true that the government bears costs in its efforts to maintain or reduce the people’s cost of living. Basically, the government needs money to help citizens,” said Wan Saiful, who is also a Bersatu Supreme Council member.
“In order to aid the people, there might be some need to increase (imposed) taxation, and the lowest hanging fruit that we have is sin taxes,” he said in the Scoop Insight podcast.
The podcast was hosted by Big Boom Media’s chief executive officer Datuk Zainul Arifin Mohammed Isa and podcast head Shazmin Shamsuddin.
Sin taxes refers to excise taxes imposed by the government on goods alcohol and tobacco, and activities such as gambling.
Wan Saiful noted how excise duty on smoked tobacco, last increased in 2015, has remained stagnant for nearly a decade now.
As such, a hike in sin tax for cigarettes by a “reasonable amount at a regular level” will aid the government in increasing its revenue, the opposition parliamentarian said.
A planned and reasonable increase can afford businesses some predictability, with companies benefitting by having time to plan their dealings, while higher-priced cigarettes could improve the health of the people in the long run.
“Sin taxes, particularly those concerning cigarettes, being increased on a regular (schedule) can help control tobacco consumption in the nation,” he added, expressing his hope for Budget 2025 to include a “clear vision” of the government’s plans for the coming years.
The current duty on cigarettes is 40 sen per stick, according to the last increase in 2015, by 42.8% from 28 sen previously.
Under Prime Minister Datuk Seri Anwar Ibrahim’s Budget 2024, the government introduced a 5% excise duty on chewing tobacco. However, cigarette taxes were not affected.
Also part of the podcast was Federation of Malaysian Consumers Associations (Fomca) council member Mohd Sha’ani Abdullah, who dismissed claims that raising the sin tax on cigarettes would lead to more black market sales.
According to Shani, the link between upped taxes and a rise in illicit activities is a myth perpetrated by industry lobbyists.
“There have been many studies, including by the World Bank, which states that (cigarette smuggling linked to increased taxes) is a narrative spread by industry players who lobby against any increase in tobacco tax by frightening policymakers,” he said.
He added that government enforcement agencies must play their part to curb smuggling.
Fellow podcast guest and economist Shankaran Nambiar pointed out that since the income generated from taxes is meant to be used to improve the public’s welfare, comprehensive tax reforms should be introduced in Budget 2025.
“If the government intends to (increase) sin taxes, it should think about how it can do so in a comprehensive manner, which will also include considerations of steps that should be taken from a welfare perspective.
“There has to be more clarity on how these things are done…perhaps (the government can provide) a clear analysis on who will be affected and what remedies will be taken (due to imposed taxes),” he added. – September 10, 2024