AS THE government considers raising tobacco taxes in Budget 2026, the Consumer Choice Centre has called for policymakers to adopt a more effective and science-based approach.
It said risk-based taxation, where nicotine products are taxed according to their level of health risk, offers a practical solution that supports public health while avoiding unintended consequences such as the growth of the black market or barriers to harm reduction.
According to its country associate Tarmizi Anuwar, while reducing non-communicable diseases is recommendable, a uniform tax on all tobacco and nicotine products may do more harm than good.
“We support the government’s health goals, but applying the same tax to cigarettes, vaping products, and other reduced-risk alternatives is counterproductive,” he reckoned.
“Taxation should reflect relative harm so smokers are encouraged to switch to safer products.”
Tarmizi said the nation already faces a significant challenge from the illicit tobacco trade. High excise rates on cigarettes have long pushed many consumers, particularly those in lower income groups, toward cheaper, unregulated products.
Between 2002 and 2010, legal cigarette sales in Malaysia fell by 31%, from 19.5 billion to 13.5 billion sticks.
During the same period, illicit consumption surged to 8.8 billion, pushing the black market share from 21% to 39% of total sales.
Tarmizi further noted that Malaysia can learn from both successful and unsuccessful global examples in handling this issue.
“The experiences of Australia, Sweden, and New Zealand show that the structure of taxation matters. We get better public health outcomes if we design a tax policy that supports switching,” he opined.
“If we over-rely on punitive measures, we risk pushing people into the black market and losing control over the system.”
At the regional level, policy inconsistencies are already impacting. The ban on e-vaporisers in Singapore and Thailand has contributed to cross-border smuggling of vaping products from Malaysia, one of the largest producers of e-vapor devices in the world.
Similarly, significant price differences between countries such as Malaysia and Indonesia create financial incentives for illicit trade that undermine national regulation and tax collection.
“Malaysia should not repeat these mistakes. We need to build a system based on science that protects consumers and does not unintentionally support criminal networks. Risk-based taxation is not about removing regulation. It is about improving it,” he said.
In this matter, the Consumer Choice Centre recommends that the government implement a tiered taxation model under Budget 2026 whereby products such as vapes, heated tobacco, and nicotine pouches which have lower risk should have a lower tax than combustible tobacco products.
Tarmizi said this structure would encourage adult smokers to make healthier choices without compromising public revenue or regulatory control.
Furthermore, as Malaysia seeks to modernise its health system and address the burden of smoking-related diseases, risk-based taxation offers a responsible and forward-looking path.
“It aligns with international best practices while responding to local challenges,” Tarmizi said.
“Taxation should support public health, not undermine it. By adopting a balanced and science-driven approach, Malaysia can lead the way in creating policies that protect both consumers and the integrity of our public institutions.” ‒ Aug 8, 2025
