Illicit share hits 56.7% amid enforcement gaps, fake tax stamps and rising smuggling.
KUALA LUMPUR: Malaysia is losing about RM4 billion in revenue as illicit cigarettes now account for more than half of total consumption, driven by fake tax stamps and low penalties, according to Japan Tobacco International Malaysia.
The estimate is based on NielsenIQ Illicit Cigarette Studies released yesterday, which showed illicit incidence rising from 54.4% in November 2025 to 56.7% in January.
The company said the increase followed the lifting of the tax moratorium, a cigarette excise duty hike in November and the retail display ban under the Control of Smoking Products for Public Health Act 2024, highlighting how quickly the market reacts when affordability is affected.
JTI Malaysia corporate affairs and communications director Mohammad Nazli Abdul Aziz said the latest figure translates into a major loss to public coffers.
“At 56.7% illicit incidence, in ringgit terms, it is approximately RM4 billion in loss of government revenue.
“This is not just an industry issue. It is a national fiscal issue and it deserves to be treated as one.”
Nazli said Malaysia should set a national target to reduce illicit trade, noting that counterfeit tax stamps have nearly doubled from 8.7% in 2023 to 16% in January.
He said criminal syndicates were increasingly investing in fake tax stamps and cross-border supply chains, citing a raid in Cebu, the Philippines, where counterfeit Malaysian tax stamps were allegedly found on cigarettes intended for Malaysia.
To help consumers identify illicit products, he said the RM12 minimum price should be used as a basic benchmark under current regulations.
“For duty-paid and legitimate products, the minimum price is RM12. Anything sold below that price is illicit.
“Even if it has a tax stamp, it is still illicit if it is sold below RM12, because under the regulation, cigarettes cannot be sold below RM12,” he said.
Nazli also raised concerns over enforcement penalties, noting that smugglers in Malaysia face fines of about RM4,000, compared with Singapore where users can be fined up to SG$10,000 (RM39,700) and smugglers up to SG$300,000.
“So maybe one of the issues here is low penalties. Smugglers will do their own cost-benefit analysis and say, ‘Maybe the risk is not so high.’”
JTI Malaysia head of external affairs Mohamad Selamat Tan said the shift from physical tax stamps to digital tax markings is expected to begin next year following consultations with authorities since December.
He said the Finance Ministry had indicated imports using physical tax stamps would be allowed until the end of this year.
“In other words, beginning next year, everything must use digital tax markings.”
Selamat said the system would include a track-and-trace mechanism requiring each stock movement to be registered as a distribution event, from factory production lines to importation into Malaysia.
“So when you scan it, you will know exactly from which point the stock is moving. This is a new feature that can address the smuggling issue.”
He said enforcement agencies would have more detailed access through the digital system, while a public verification application is expected to be announced later by the Customs Department.
JTI Malaysia managing director Didier Ellena said sustained progress would require consistency and coordination.
“Without alignment across the system, gains can be quickly reversed, as we have seen.”
