Negative Multiplier Effect if Duty-Free Areas Taxed

KUALA LUMPUR 20 Nov. – The ZON Duty Free - member of Atlan Holdings Bhd Group of Companies, one of the largest duty-free retailing groups in Malaysia, today said that the proposed excise tax on all cigarette and tobacco products at duty-free areas will cause a negative multiplier effect on the Malaysian economy.

This move by the Government not only impacts revenue of retailers. The plan may also discourage tourists to visit what will be semi duty-free zones; threaten jobs that are needed by predominantly B40 communities; and de-incentivise foreign and local investments into these areas.

Ong Bok Siong, Director of The ZON Duty Free (The ZON), said, “Duty-free retailers like us are already struggling very hard to cope with the severe drop in tourism and travel activities during the on-going COVID-19 pandemic.

“In fact, duty-free sales are expected to decrease by US$29.4 billion in the Asia Pacific region this year, according to market research firm, Globaldata.

“Clearly, it is the wrong time to impose excise duty on cigarette and tobacco products in duty-free areas. These products are very popular with International and domestic travellers and form a significant part of a duty-free retailer’s revenue,” he explained.

Ong added that The ZON also expects consumer spending to be conservative in the near future. “Amidst this bleak outlook, The ZON along with our fellow industry players are already taking tough measures to reduce our cost base.”

“If the industry’s revenue stream is pressured even further, some duty-free retailers may be forced to reduce its workforce or close altogether. Surely this outcome is misaligned with the federal government’s aim to reinvigorate the economy that has been hurt by the crisis,” he said.

“We urge that the Malaysian Government listen to the call of businesses and stakeholders operating in these duty-free areas and abandon the intention to tax duty-free cigarettes. The focus now should be to assist businesses to get back on their feet so they can in turn contribute positively to rebuilding our economy,” Ong concluded.

In his recent Budget 2021 speech, Finance Minister Dato' Sri Tengku Zafrul said that taxes would be imposed on cigarettes and tobacco products on all duty-free islands and any free zones that have been permitted retail sales of duty-free cigarettes. - DagangNews.com