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The theme of this year’s World No Tobacco Day, which is observed every year on the 31st of May, is “Unmasking the Appeal”—a call to expose how tobacco and nicotine industries shape perception, influence policy, and push their products despite the cost to public health. A new report by the think tank Social & Economic Research Initiative (SERI) argues that Malaysia’s tobacco control efforts are losing steam, and that one of the most effective tools we have is also the most underused: taxation. On this episode of #ConsiderThis Melisa Idris speaks with Muhammad Daniel Kittu, Research analyst at SERI, where he specialises in health economics.
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00:00Hello and good evening. I'm Melissa Idris. Welcome to Consider This. This is the show
00:15where we want you to consider and then reconsider what you know of the news of the day. The theme
00:20of this year's World No Tobacco Day, which is observed every year on the 31st of May,
00:25is Unmasking the Appeal. It's a call to expose how tobacco and nicotine industries shape perception,
00:35influence policy and push their products despite the cost to public health. A new report by the
00:42think tank Social and Economic Research Initiative argues that Malaysia's tobacco control efforts
00:50have been losing steam recently and that one of the most effective tools that we have is also one
00:58of the most unused, taxation. So joining us on the show to discuss this more is the author of the
01:05aforementioned report, Mohamed Daniel Kitu, who is a research analyst at Surrey where he specializes
01:11in health economics. Welcome to the show, Daniel. Thank you so much for joining me.
01:14Okay, so talk to me. I want to start broad and maybe we can begin with why you think Malaysians
01:22should care about tobacco tax reform right now. I think this is coming at a time when vape regulation,
01:30vape banning is the focus of headlines, is what people are talking about. So why do you argue that
01:36tobacco taxation should also be a focus? Thank you, Melissa. So the reason that tobacco taxation is very
01:44important despite the fact there's a lot of attention on vapes is because the smoking prevalence for
01:50conventional cigarettes is actually a lot more higher compared to e-cigarettes. So in 2023,
01:55it's around 16.8% for conventional cigarettes, but for vape is only about 5.8%. So but the reason
02:02there's a lot of attention on vapes is because there's been such a huge increase between 2011 and
02:072023, which is I think about from 0.8% to 5.8%. So that's like a... Because it started from a low
02:13base and it went up. Exactly. We know that is important, but it's important that we not lose
02:18focus on conventional cigarettes. So suppose that we have the best case scenario and vapes are
02:23effectively banned. But what happens to those who are already hooked on these products? They've
02:28already had a tease of nicotine. So there's a good chance that they're going to turn to conventional
02:33cigarettes because it's still legal and it has been more affordable over time because we haven't
02:38had an increase in tobacco taxes since 2015. Right. Okay. Let's unpack all the things that you
02:45said. Quite a number of interesting but disturbing facts that you've raised. 16.8% is the smoking
02:53prevalence you said. That's quite high for a country like Malaysia. I noted in your report that you said
02:59it had been on a declining trend, but it had... Smoking rates in Malaysia have appeared to have
03:05plateaued in recent years. Talk to me about this. Why do you believe that this has been... What's been
03:10contributing to this trend? So first, I should also clarify that 16.8% is just for conventional cigarettes.
03:17So if you're talking about overall smoking, overall smoking tobacco products, it's actually
03:23around 19%. 19%? Exactly. The reason I'm focusing on cigarettes is because that's the smoking product
03:30that has the highest prevalence. So the reason is because without taxes on these products, they become
03:37more affordable over time because of rising GDP per capita. So because of that, it's become more
03:43affordable relatively over time. So that's why it's important to have regular increases on tobacco
03:52products so that you basically prevent these products from being more affordable over time.
03:58Okay. All right. Talk to me about affordable over time. So when we talk about affordability,
04:04what does it mean in this context? So what that essentially means in terms of affordability,
04:11so suppose from 2016 to 2022, we have not had an increase in tobacco taxes. And at the same time,
04:19so what that essentially also means that the nominal prices haven't really changed much.
04:23Okay. So as a result, as people's income grows over time, that becomes more affordable. So they have
04:28more disposable income. So without any measures that reduce the affordability of these products,
04:35because they're addictive products. So without any effective measures that increase the prices of
04:40these products, they're going to be, well, there's not, there's not much of an incentive for people
04:45to try to reduce, to stop or reduce consumption or quit completely. Okay. All right. So the idea is to
04:52continue raising the prices as income, income also increases. When, before I read your report, Daniel,
05:00I have to say I hadn't realized just how long it had been since Malaysia saw an excise tax increase.
05:07And I cover the budget every year. And, you know, it's one of the things we look out for. In fact,
05:12it feels like it's the most, it's the lowest hanging fruit for the government to increase tax revenue.
05:19But we haven't had one in 10 years. It's been 10 years since we've had a tax increase. Your report
05:25talks about raising the excise tax from, is it currently 40 cents per stick? That's right.
05:33Currently 40 cents per stick to 63 cents per stick. Talk to me a little bit about the rationale behind
05:42that figure. Right now, if I'm not mistaken, how much are conventional cigarette prices and what
05:49would that take it to? So a pack is about 17 ringgit. So the reason of my suggestion of increasing
05:57to 0.36, 0.63 cents, well, that's really just a bare minimum to bring it back to the affordability
06:03levels in 2016. Okay. So that's the floor you're hoping for. Yeah. So the reason I'm highlighting that
06:11is to show that this is what happens when you don't pay attention to this. This is what happens when you
06:15you don't increase tobacco taxes for the past 10 years. But I think another key thing to remember
06:23is, so once you, this can't be a one-off thing. There needs to be regular increases in tobacco taxation.
06:29So one of my recommendation is to align with the recommendations by the WHO. So which is to
06:36increase it by inflation plus income growth. So that essentially ensures that tobacco products,
06:43especially cigarettes become less affordable over time. Okay. So that gives the more incentive for
06:51smokers to quit or at least reduce their tobacco consumption. Okay. So you're saying if, if the
06:57bare, the bare minimum of an excise tax increase should be 63 cents per stick, and that would take
07:03cigarette prices per pack up to 22 ringgit plus. Okay. And that is according to 2016 affordability figures?
07:14Yeah. That's right. So it could be much more for 2025 affordability figures. Okay.
07:22What do you project the outcomes to be in terms of a reduction? If, if the government says, you know, this
07:29budget, the government says, hey, we're going to increase tobacco tax, excise tax to 70 cents per stick,
07:38or even 63 cents per stick, the bare minimum that you're recommending, what would be the benefits?
07:43What would be the projected outcome in terms of a reduction in cigarette consumption, for instance?
07:47Yeah. So the most important aspect to reducing consumption is that it reduces healthcare burdens on
07:53individuals and over stretch healthcare system. So if you want to understand how,
08:05how, how this impacts individuals, it's also important to consider a lot of other factors.
08:12So, so it's not only about reducing consumption, it's also about being able to raise revenue.
08:16Yes. So, so the thing about tobacco products is it's what you know, they're very addictive. So as a
08:23result of that, they're what they're called, they're deemed as being price inelastic. So what that
08:29essentially means is that any price increase is relatively larger compared to the quantity of demand
08:37that's decreased. So that's the consumption. So that's why it describes a sort of win-win situation
08:41where you can increase revenue, but at the same time reduce consumption of these products.
08:45Okay. Well, you mentioned in your report that tobacco taxation is pro-poor. Tobacco taxation is
08:55progressive. Can you maybe unpack that for me? Why would raising tobacco tax be good for those in the lower
09:04income? Yeah. So I guess like a lot, the reason why people might push back against it is because
09:09consumption taxes tend to generally be regressive, but something like tobacco taxes are actually
09:14kind of unique because, so one, because generally low-income individuals are a lot more price sensitive
09:23to these products. So if there are sharp increases, so that's quite key here, there needs to be sharp
09:28increases in order to observe an impact on a significant impact in reducing consumption. Right.
09:36Okay. When you say sharp increases, there was an example that you mentioned in your reports. Was it
09:44Brazil? That's right. That had done this sharp increase and saw good outcomes. Talk to me about that.
09:51Yeah. So they, I believe was, they increased their excise taxes by 62% between 2012. 62%? Yeah. Between 2012 and 2014.
10:02And they were also able to, um, increase revenue and reduce consumption. So another thing that's also
10:08important to highlight that, so like Brazil had a, perhaps a problem with, um, illicit trade of
10:13cigarettes. Similar to Malaysia, we do have a problem with illicit trade of cigarettes.
10:18And this also comes back to why, um, tobacco taxes have been increased for the past 10 years. Quite
10:23often there is this argument that, you know, if you increase taxes on cigarettes, increase their prices,
10:28that's going to drive people, um, drive the scale of illicit trade. But that's actually not true.
10:34It's actually a lot more complex than that and more nuance. Okay. So there are a lot of other factors
10:39that actually contribute to, um, the scale of illicit trade and that's really corruption and the lack of
10:45enforcement. Okay. Yeah. I am curious about that. And I have heard that narrative before, Daniel, that
10:50I think there's a common pushback against increasing any kind of, um, tobacco tax because, you know,
10:58they say that it is the driver of illicit trade. What does the data actually tell us about this claim?
11:05Yeah. So, so like in my report, I did highlight a study that was done by some researchers from UPM.
11:11Um, so they did, um, essentially build this economic model. So there's essentially kind of showed that, um,
11:19that it wasn't the legal prices of cigarettes that were the driving factor of illicit trade,
11:25but rather it was enforcement. So, and that was really measured through the transparency or the
11:30corruption perception index, which measures, um, essentially it's an indicator of the level of
11:35corruption in a country. Uh, so actually another thing that's actually quite interesting,
11:39this is not mentioned in my report, but what I noticed that, um, between 2012 and 2014,
11:45so we had increases in taxes back then. Okay. Um, and there were increases in tax revenue at that,
11:52during that period. But then after 2015, so the last tax increase in 2015, there wasn't much of an
11:59increase in, uh, tax revenue. The reason is because of the level of corruption. So actually between,
12:06if you could just go to Transparency International's website, if you look between 2012 and 2014,
12:11the, uh, level of corruption was actually quite stable at that, that period. And as you can see
12:17from my report that there was quite significant increase in revenues at that period. But in 2015,
12:22I think we all know, uh, what was going on in the country back then. The, yeah, we had high levels of
12:28systemic corruption. And as a result, result of that, those, that increase in tobacco taxation wasn't,
12:35didn't really bring out the outcomes that we wanted, just an, um, an increase in tax revenue.
12:40Okay. Right. But, so the difference with why we can do this now is it does seem that the government is,
12:47um, quite serious in tackling corruption and dealing with enforcement. So like in my report,
12:52I highlighted, um, the formation of AKPS, which is the, uh, new agency, um, that's formed, I think,
12:59under the whole ministry. So that essentially consolidates like more than 20 agencies to try
13:04to reduce duplications of any kind of, um, uh, enforcement, um, um, that they need to address,
13:12enforcing against, um, like any kind of illicit good. Right. Yeah. Well, I also thought it was quite
13:17interesting, um, the point you raised in your report about the track and trace system, because I, why not
13:23use technology, um, to be able to combat illicit trade. So if we were able to monitor the movement
13:29of tobacco, it would make it much easier to combat illicit trade. Talk to me about that. Is it,
13:34is this a hard system to implement? Is it something that is feasible in a market in a country like
13:41Malaysia? It's not really unfeasible. It's something that's been used in many countries.
13:46Um, so what it involves is essentially is that you have a scannable code on a cigarette pack.
13:52So an authority, uh, someone with, uh, so an enforcement officer could scan that code and they
13:57will take them to a secure database that essentially tracks, um, the movement of that pack of cigarettes
14:03across the supply chain. So from the point of production to the point of sale. So it's supposed
14:07to tell you where it should be. So if it's not where it's supposed to be, that tells you that this is,
14:12um, being sold illegally. Okay. All right. And you said this is being done elsewhere? Yeah. Okay.
14:18So maybe if we are able to use these tools to combat illicit trade, then there really is no
14:24kind of excuse not to increase, uh, tobacco tax, uh, going forward. How, how does our tax rate, uh,
14:31and affordability rate compared to other countries? Are we behind the curve? Are we, what, what,
14:37what's happening in other countries around the world that you've looked at? Yeah. So we do have
14:43one of the lowest legal cigarette prices. So in terms of affordability, which I think is key,
14:48especially affordability trends, uh, we're comparing it to countries like, um, Thailand, Singapore.
14:55So our trends are a lot more concerning because of how much more affordable they've become.
15:02Um, and especially the Philippines, Philippines is actually a good example of how they've addressed
15:06the affordability of cigarettes. Okay. Because since 2012, they've had regular increases in tobacco
15:10taxation. So that's allowed them to, um, address tobacco consumption. So actually, in fact,
15:17I believe since 20, around 2015, 2016, they've actually surpassed Malaysia in terms of tobacco use
15:23prevalence, which is kind of disappointing because we were actually ahead of them in terms of, um,
15:29the level of tobacco use prevalence. But now we have kind of fallen behind. Wow. It means we have
15:35higher rates of tobacco use compared to the Philippines. Exactly. Yes. Wow. That's really quite
15:41shocking because it was only a few years ago that we, I remember the kind of, um, you know, the,
15:47the, the, the stereotype of countries around ASEAN and we think, oh, we're actually quite,
15:52we're doing quite well. When we look at, um, the smoking prevalence, and I, if you want to make the
15:58case of just traditional cigarettes, Malaysia has a target, if I'm not mistaken, of reducing smoking to,
16:07uh, below 15%, or is it 15% by 2025? That's right. And then below 5% by 2040. Yeah. 2030 or 2040.
16:16Okay. So does it, does that, is that a realistic goal? Are we on track? I mean,
16:22for this year, we don't make, do we make the goal of, um, 15%? That's hard to say. I would,
16:30I'd be quite pessimistic to be honest, but without being said, I, um, that doesn't mean we can't do
16:37anything right now. Like, I think the focus is what our next steps are going to be. So I think by the
16:42next budget, we need to increase tobacco taxes. It's been 10 years. It's been a decade.
16:47Right. So, and we have to lock in regular increases so that this doesn't become a problem
16:53in another 10 years from now. I can, I'm assuming taxation is only one tool in our toolkit. Yeah.
17:01What are the other tools that need to be used concurrently with taxation that can help us achieve
17:07a lower smoking prevalence rate? So actually, when it comes to other forms of tobacco control,
17:12the Malaysian government has done a pretty good job. So like an example is the point of sale display
17:17ban. Okay. Right. So, uh, that's been recently been passed and I think it's going through a phased
17:21implementation. What is the point of sale display ban? So essentially, um, it hides the, these tobacco
17:27products behind the cabinet. So that basically reduces... Don't we still see it right now? I mean,
17:31we go to a convenience store and it's behind the cashier. So it's meant to, uh, it's going through a
17:37phased implementation now. So it's supposed to be completed by October. Okay. Yeah. Something to
17:43watch out for in terms of development. Okay. But if I'm being honest, I'm doubtful that that's going
17:47to have much of an impact by the end of the year because between October to December, there's not
17:52much time. So even then that's probably not going to have as much of an impact as we want it. So that's
17:58what point of sale display. Are there anything else? Are there other tools that need to be
18:05implemented for us to achieve a goal? So another aspect which I touched on was also addressing
18:11illicit trade of cigarettes. So even though we are, of course, increasing cigarette prices don't
18:18drive illicit trade, but it still exists and we do have to address it because there are going to be a
18:24segment of the population that are going to turn to illicit cigarettes. It doesn't mean everyone will,
18:28but it is something that needs to be addressed. And also, um, tobacco taxes can actually, um,
18:35be used, um, to actually fund this sort of initiative. So for example, perhaps for not,
18:40for the first, um, uh, thing that the government could do is allocate revenue raised from these taxes
18:46to, um, enforcing against illicit trade or cigarettes. So essentially these are the same, um,
18:52authorities that deal with illicit goods in, in general anyways. So, um, funding these, um,
19:00enforcement agencies would, uh, at least be able to, um, help address this, um, this, I guess you could
19:07see the black market in cigarettes. Then like, uh, by the longterm, um, another option would be to
19:13allocate these revenues to smoking cessation products or smoking cessation programs. So that
19:19basically, um, offers a way out for smokers, a way for them to quit. So what's key here is that, um,
19:29so with smoking cessation products, you could get them from a government hospital, for example,
19:36but the problem is, I think, even I myself experience this, it's not easy to go through
19:41public healthcare system. It's hard to get appointments and so on. So there are options that
19:46are available out of pocket, but they can be a lot more expensive. And what's, um, concerning and
19:52disappointing is a lot of these smoking cessation products tend to be a lot cheaper than cigarettes.
19:57So what incentive do people have to want to quit smoking? Because it's cheaper to, to continue
20:02smoking. Right. Yeah. Well, well, does the same apply? I'm just wondering because, so you talked
20:09about, uh, regulation, um, you know, point of sales display, taxation and the like, there's enforcement
20:15that you mentioned about illicit cigarettes. Is, does education play a part of it? Because do,
20:19can we stop the practice of smoking instead of focusing on the cessation of smoking?
20:25I would say, yeah, education is important, but I do think at this point, most people are aware
20:33about the harms of smoking. Okay. So it's not a lack of information that's causing people to start
20:38smoking. Yeah. I think, yeah, the key thing is actually affordability because, so I know I mentioned
20:45about how low income individuals are more price sensitive, but that also applies to younger people.
20:50So if, so essentially higher cigarette prices actually acts as a deterrent to, um, younger smokers
20:57trying to pick up the habit because if it's more expensive and obviously younger individuals tend to
21:02be earning less. So addressing this, um, by increasing taxes, which will essentially increase the prices
21:09of these products will act as a deterrent from younger people to pick up the habit of smoking.
21:14Does, um, does it make sense to tax vape more aggressively, just like, uh, conventional cigarettes?
21:22Or, um, does vape warrant a different physical approach?
21:27Generally speaking, the best practice would be to tax vapes, but we have to consider the context in
21:33Malaysia. So we have a huge problem with, I think, with illicit drugs being used in vapes because of how
21:39customizable these products are. So there is a case for wanting to ban these products as opposed to
21:46just taxing them. But to be honest, only time will tell how effective this is. So, this is, so actually
21:50what's key is actually enforcement. So, as I said that, so enforcement against these products will be
21:57done by the same agencies anyways. So that's why actually tobacco, increasing taxes on tobacco products
22:02could be used to, to at least have an additional source of revenue to, um, uh, essentially fund this agency
22:08so that they can more effectively enforce these bans. Okay. This year's World No Tobacco Day theme, I
22:15really think is quite interesting because it calls on governments to unmask the appeal of tobacco and
22:22nicotine products. I'm just wondering, Daniel, from your research, uh, what do you see as some of the
22:30tactics that have been typically used maybe in the past or in other countries or elsewhere, um, that
22:36shape perception, that shape policy? How have you seen, um, uh, what's been documented or done before?
22:46Yeah. So in terms of what happens in general, the worst case scenario is for a situation or state
22:55capture to occur, especially when it comes to the Ministry of Finance. Now, I'm not saying this is going
23:00on in Malaysia, but this, this does happen in various countries where the Ministry of Finance might be
23:05listening too closely with the tobacco industry and that essentially deters them from actually
23:10increasing taxes on, on their products. Um, there's also, um, a lot of like corporate social
23:17responsibility activities that the industry conducts, um, which is essentially a way to launder
23:24their reputation. At the end of the day, the product that they're selling is a harmful product.
23:29So why are we acting as if this is normal? So, so that's why, um, under the WHO's, um, article 5.3 of
23:38the FCTC, which is the Framework Convention on Tobacco Control and which Malaysia is a signatory to,
23:43the policy makers are meant to protect, uh, public health policy from vested interest, i.e. the interest
23:49of, to the tobacco industry. So what that essentially means is you're not really supposed to bother with
23:56them. You're meant to ensure whatever policies you're implementing are for the good of public
24:02health, not for the good profits of the tobacco industry or any industry for that matter. Well,
24:08in the minutes that we have left, can I ask you what message you would like to give to our audience
24:13tonight? And they could be, um, you know, public, even people who smoke or don't smoke or even policy
24:20makers who may be thinking about, uh, tobacco control policies. How, what would, what message
24:26would you like to leave them with given that you've been in all this work, this work into your report?
24:30What's the takeaway message tonight, Daniel? I'd say it's time to increase taxes on tobacco products.
24:37Uh, I'll, I'll mention a quote by Adam Smith, who's widely known as the father of modern economics. So
24:43he said, sugar, rum, and tobacco are commodities that are nowhere near essential and thereby they
24:50are perfect for taxation. There you go. It's been 10 years since we've seen, um, access tax increase.
24:56Thank you so much for being on the show and sharing, um, your, the results of your work today. Thank you.
25:00I appreciate your time. That's all we have for you on this episode of Consider This. I'm Melissa Idris,
25:05signing off for the evening. Thank you so much for watching. Good night.
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