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KOTA KINABALU: A group from Labuan has not taken lightly the comments of Finance Minister Tengku Zafrul Aziz, which hint that the duty-free areas are hubs for the illegal cigarette trade.
Labuan Chinese Chamber of Commerce President Wong Kii Yii said Zafrul’s statement was “incorrect and unjustified.”
“The business community, as well as the people of Labuan, totally reject this assertion made by the minister,” Wong said in a statement today.
“This statement is negatively reflected in the Ministry of Finance and the Perikatan Nasional federal government led by Prime Minister Muhyiddin Yassin.
“We would like to see for ourselves the so-called minister’s analysis that shows that the duty-free areas act as hubs for the illegal cigarette trade.”
He said that according to his sales records, Labuan sold a total of 300 million tax-free cigarettes a year.
“This is a far cry from the minister’s comment ‘high volumes that don’t make sense’.”
In an interview with The Edge, Zafrul said that the government decided on several measures to improve revenue collection, including the black economy.
“So no more duty-free cigarette sales in the duty-free islands where it sometimes becomes a hub.
“We did an analysis: how is it that so many can smoke on this island? It doesn’t make sense, the amount of cigarettes per capita, including tourists, is too high, ”he said last week.
The minister said the government was also looking to reduce leakage and that one of the ways was to curb the illicit smuggling of high-tax products.
In response to Zafrul’s comments, Wong said the ministry had not only gotten the math wrong, but was also “clearly misinformed” about how the illegal cigarette unions operated.
“We would like to invite the minister, as well as the ministry officials, to visit Labuan and investigate. Go ahead, audit us. Our members will be more than happy to cooperate. Our island is not that big, it is difficult to hide containers full of cigarettes, ”he said.
Wong said the national economy would suffer if excise taxes were imposed on duty-free cigarettes according to the ministry’s flawed analysis.
He said that cigarettes were one of the most popular retail items in any duty-free area.
Take it out of the equation and there will be a severe shortfall in retail revenue.
“Labuan’s economy has already been hit by the decline in the oil and gas sector and the Covid-19 pandemic, and now, the new excise duties on duty-free cigarettes may be the last straw.”
