LANGKAWI, Dec 20 (Sin Chew Daily) — When cigarettes are no longer duty-free starting next year, the retail sector in Langkawi may suffer a drop in sales of up to 30% to 40%, a double blow for the sector already affected by the COVID-19 pandemic.

Langkawi Chinese Chamber of Commerce (LCCC) president Lee Han Eng said tourists loved to buy duty-free cigarettes before leaving Langkawi as the duty-free cigarettes are popular among tourists and the tourist industry is the main economic activities on the island.

Duty-free cigarettes make up 30% to 40% of sales for retail shops on the island. For retail shops operated by Muslims, they rely on the sale of cigarettes as they do not sell liquors.

Lee said if the price of duty-free cigarettes was the same with cigarettes with tax, sale of cigarettes would drop and this would affect the retail outlets.

At this juncture, the government should be assisting the tourist industry in Langkawi to recover and not negatively impact on retail operators' revenue, Lee said.

LCCC will be observing the implementation of excise tax on cigarettes pending details of the implementation to be released by the government before taking further steps, Lee said.

LCCC wrote to the finance ministry last month on the government's decision to impose excise duties on duty-free cigarettes with effect from January 1, requesting the ministry to review the decision.

LCCC has so far not received any reply from the ministry.

Illegal cigarettes and duty-free cigarettes are two different things, said Lee, adding that they should not be grouped together.

The government should enhance the enforcement against illegal cigarettes instead of targeting retail operators, Lee said.

The government should not impose tax to tackle the illegal cigarette trades, he added.

Deputy finance minister Datuk Abdul Rahim Bakri said in Dewan Rakyat that illegal cigarette trades were rampant on some duty-free islands.

"Illegal cigarettes are sold in Sabah, Sarawak and West Malaysia and the government is unable to collect tax revenue from the illegal cigarettes," he said.

Hence, it was proposed in Budget 2021 that excise tax would be imposed on cigarettes at duty free zones starting January 1, he said.

"The government also adopts various measures to enhance enforcement."

To curb smuggling activities, the government has amended existing laws such as Free Zoe Act and Excise Act to give customs enforcement officers more powers to seize contraband items.

The amendment of the laws also allows Customs department offices to be used as detention centers for suspects before charges are filed against them.

In tabling the 2021 Budget, finance minister Tengku Zafrul Tengku Abdul Aziz said tax would be imposed on tobacco products in duty free zones.