Tobacco use continues to pose serious health and financial challenges in Malaysia, costing the government an estimated RM11 billion annually. This financial burden includes RM6.2 billion spent on treating smoking-related illnesses and an additional RM5 billion lost to the illegal cigarette trade. Each year, around 27,000 deaths are linked to smoking-related illnesses. Despite these severe consequences, cigarette prices have remained largely unchanged for nearly a decade, even as healthcare costs rise and the country loses billions annually to illicit trade.

Why Cigarette Prices Have Not Increased Since 2015

The last increase in cigarette excise duty took place in 2015, when the rate was set at RM0.40 per stick or RM8.00 per pack. Since then, the rate has remained unchanged. While Budget 2024 and the 2025 proposals introduced excise measures for other tobacco products, such as chewing tobacco, there were no changes to cigarette taxes.

The tobacco industry argues that higher taxes could lead to a rise in demand for cheaper, illegal alternatives. The Confederation of Malaysian Tobacco Manufacturers maintains that affordability is a key factor influencing consumer behaviour. 

However, international bodies such as SEATCA and the World Bank have consistently challenged the tobacco industry’s narrative that higher taxes are the main driver of illicit trade. These organisations find that industry-supplied figures are overstated and emphasise that non-price factors, such as weak governance, corruption and limited enforcement capacity, play a more significant role in fuelling the illegal cigarette market.

Although industry reports indicate a rise in illicit cigarette trade following the 2015 tax increase, with the market share growing from 36.9% in 2015 to 63.2% in 2019, public health experts argue that this trend reflects enforcement shortcomings rather than taxation itself. In response, the Malaysian government has taken steps to strengthen enforcement in recent years, including tightening transhipment controls and enhancing Customs capacity.

Smoking-Related Healthcare Costs Outweigh Tax Revenue

Tobacco use continues to place a significant financial burden on the public healthcare system. In 2020, the government spent RM6.2 billion treating three major smoking-related illnesses. This was more than double the RM3 billion in tobacco tax revenue collected during the same period. Projections made in 2017 warned that, without stronger control measures, smoking-related healthcare costs could rise to RM7.4 billion by 2025. These costs directly affect the public healthcare system, especially as a large proportion of smokers rely on government-provided services.

Health advocates continue to support tobacco tax increases as an effective way to reduce smoking, particularly among lower-income groups who are more sensitive to price. The Ministry of Health is also working on subsidy policies to improve access to quit-smoking programmes.

Illicit Cigarette Trade Costs Malaysia Billions Each Year

Illegal cigarettes made up 54% of the market as of March 2025. This trade is estimated to cost the government RM5 billion annually in lost revenue. If all cigarette sales were taxed, the potential revenue could reach RM14 billion.

Illicit products are sold for as little as RM4 per pack, far below the RM12 legal minimum. Compliance with tax stamp regulations remains low. An estimated 69% of illicit packs carry no tax stamps, while 31% use counterfeit versions.

A small number of smuggled brands dominate the market. Gaps in border enforcement and the use of tactics such as disabling vessel tracking systems have made it difficult to contain the issue. In one case, Johor Customs seized six million contraband cigarettes in March 2025.

In response, the government has taken steps to tighten enforcement. From 1 January 2024, Bukit Kayu Hitam became the only authorised northern exit for cigarette imports. 

A Renewed Commitment Under The 13th Malaysia Plan

As part of wider healthcare reforms, the government will expand its “pro-health” tax to include tobacco, vapes, and alcohol. Announced under the 13th Malaysia Plan (RMK13) on 31 July 2025, the move aims to support behavioural change and address the growing burden of non-communicable diseases (NCDs) in the country.

Prime Minister Datuk Seri Anwar Ibrahim stated that the initiative is designed to increase public health awareness and ensure sustainable healthcare financing. The RMK13 allocates RM40 billion over five years to the healthcare sector, including infrastructure upgrades, increased access to generic medicines, and strengthened digital health systems.

The pro-health tax builds on existing measures that began with sugar-sweetened beverages, and now formally extends to cover tobacco-related products. This policy shift means the government uses prices and taxes to get people to buy less of things that harm their health.

Malaysia has made notable progress under the WHO’s MPOWER framework, with measures like smoke-free zones, public education, and the Control of Smoking Products for Public Health Act 2024, which came into effect on 1 October 2024. These efforts have laid the foundation for stronger tobacco control enforcement.

With the expansion of the pro-health tax under the 13th Malaysia Plan, the government signals a firmer stance on tobacco-related harm. Malaysia is using tax changes, health investments, and public campaigns to build a healthier future and lower smoking’s economic toll.

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• Health
• Smoking
• Tobacco