Malaysia: Tobacco Price War To End Soon

JT International Bhd (JTI Malaysia) is the last of the Big Three tobacco manufacturers in Malaysia to increase their pricing on cigarettes after the legal tobacco industry received guidance on retail selling prices from the ministry of health (MoH) recently.

The price of JTI cigarette products will increase by 40 sen today. With the latest price change, a 20-stick pack of Mevius cigarettes now retails for RM17.40, Winston for RM15.90 per pack or RM17.90 per pack (non-filter) and LD for RM11.90.

When contacted, JTI Malaysia managing director Cormac O¡¯Rourke said the price revision reflects the equirements for a pass-on to the differential tax following the repeal of the goods and services tax and the reintroduction of the sales and service tax (SST) on Sept 1.

¡°Following clarification from the MoH that the minimum tax pass-on to meet the requirements under the law is 40 sen per pack, we have now revised our prices accordingly,¡± he told The Edge Financial Daily yesterday.

¡°While any increase in the price of legally purchased cigarettes is regrettable, owing to 60% of all cigarettes sold in Malaysia being illegal and priced below RM10 per pack, we do welcome the renewed commitment made by the current government during last week¡¯s Budget 2019 speech that they will tackle the illicit cigarette issue,¡± O¡¯Rourke added.

The tobacco companies have been in limbo for about two months while awaiting guidance from the MoH following the SST implementation on Sept 1. The ministry administers tobacco price approvals under the Control of Tobacco Products Regulation 2004.

The ministry eventually provided the price guidance of a minimum increase of 40 sen on retail selling prices on Nov 2. On the same day, British American Tobacco (Malaysia) Bhd (BAT Malaysia) announced a 40-sen hike in the prices of its cigarette brands.

Under the new prices, BAT Malaysia¡¯s key brands like Dunhill, Pall Mall and Rothmans now retail at RM17.40, RM15.90 and RM12.40 respectively.

A check with various retail stores yesterday showed that cigarette prices under Philip Morris (Malaysia) Sdn Bhd (PMM) remained unchanged at RM17.20 per pack for its flagship Marlboro brand.

However, according to a new price list sighted by The Edge Financial Daily it revealed that PMM had increased its cigarettes brands by 20 sen effective Nov 6.

In September, the Big Three tobacco manufacturers had filed for approval from the MoH to increase the retail price of cigarettes in response to the nationwide shift to the SST. As an immediate measure, BAT Malaysia and JTI Malaysia had raised prices by 50 sen a pack while PMM had adjusted prices upwards by 20 sen.

However, their divergent positions had triggered a price war.

The competition intensified when BAT Malaysia and JTI Malaysia rolled back the price of their products to what they were before later that month to better compete with PMM.

It has been reported that today, some 60% of the cigarettes sold in Malaysia are illegal due to excessive tax increases and lax enforcement.

On Nov 2, in his Budget 2019 announcement, Finance Minister Lim Guan Eng had said that the Royal Malaysian Customs will step up enforcement against cigarette smuggling and that in the process the government hopes to recover at least RM1 billion in tax losses as a result of clamping down on smuggling and fraudulent activities.

Guan Eng noted that the government has been collecting less revenue due to the widespread availability of much cheaper contraband alternatives or even illicit products packaged with fake customs duty labels.  Enditem

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