Budget 2023: The one stark item that will be taxed in Malaysia; and why Singapore might be better off not getting tax revenue from it.

Recently there has been much discussion in Singapore about Budget 2023. There have been recent debates by various MPs on the various measures implemented, with DPM Wong highlighting it is a delicate balancing act amid a tight fiscal position. He explained in Parliament how the Finance Ministry planned to balance the Government’s books while responding to MPs who had called for more cost-of-living support or more help for certain groups or areas.

Now, wouldn’t it be great if there is one more avenue that tax revenue can be raised? In fact, we need to look no further than our neighbour across the causeway, Malaysia.

Well, should it then be if we can’t beat them, earn from them?

On 24 Feb 2023, Malaysia Prime Minister Anwar Ibrahim unveiled an expansionary 2023 budget of RM388.1 billion (US$87.50 billion), the largest in the country’s history. Likewise (to Singapore), he announced a slew of measures aimed at lowering the cost of living amid high inflation as well as more progressive taxes.

While reading the news, one measure, in particular, caught my attention.

Although the Premier did not offer more details on these measures but said in his speech that a tax on luxury goods, as well as e-cigarettes and vaping, would be introduced.

Budget 2023: Excise duty on vape liquid, gel to be implemented (read here)

Now the market value of vaping in Malaysia is not small, and worth more than RM 2 billion (or S$609 million). A duty on that would be a boost to the country’s tax revenue no doubt. After all, the vape industry and its popularity are moving quicker than regulation can catch up.

To quote: Prime Minister Datuk Seri Anwar Ibrahim said although vape with nicotine is still illegal, the product is still being sold widely and is estimated to be worth more than RM2 billion.

“Would it not be great if it is monitored and taxed to discourage the usage of vape,” said Anwar, who is also the finance minister, during the tabling of Budget 2023 in Dewan Rakyat.

Now, why didn’t Singapore think about that?

In the past, prior to the opening of casinos in Singapore, there was much debate over whether to bring in integrated resorts and casinos to Singapore. Mr Lee Kuan Yew (when he was still alive) stood up to state that he was against gambling. He had initially resisted the move to bring casinos into Singapore but he eventually changed his mind because he saw the benefits that it could bring to the country.

In his own words: IRs needed for S’pore to keep abreast of the top cities (read here)

Perhaps given the size of Malaysia as compared to Singapore, despite vape with nicotine being illegal, it is still widely sold and used.

Hong Kong relaxed the use of e-cigarettes, allowing them to be used as a pharmaceutical product since 2009. However, in 2021, Hong Kong lawmakers passed a bill banning the import, sale and manufacture of electronic cigarettes and heated tobacco products. Still, in Oct 2022, it was announced that Hong Kong authorities were considering amending the law, with an eye on the billions of dollars that electronic cigarettes and heated tobacco products trade generate annually.

In Singapore, under section 16(2A) of the Tobacco (Control of Advertisements and Sale) Act (TCASA), it is illegal to possess, purchase and use vaporisers in Singapore as of 1 February 2018 (read here). Persons found guilty of this offence can be fined up to $2,000.

Thriving Black Market

Despite the ban, there is a thriving black market. This is especially so among the youths in Singapore. Through videos on YouTube that there was a movement overseas, with people claiming that vaping was healthier than smoking. They were also doing tricks with vape smoke. The reasons for young people picking up vaping and smoking overlap, one of which is the “challenge” factor, in which teenagers try to smoke or vape in school without getting caught.

In a 2018 Health Promotion Board survey of 600 youth, over 70 per cent of youth were unaware that e-cigarettes contained nicotine and cancer-causing chemicals, and their vapour contained fine particles (also known as PM 2.5) that could cause respiratory diseases. 

Inside Singapore’s Thriving Black Market: Is It Time To Rethink The Vape Ban? (read here)

To quote the above article:

Channel News Asia reported that there is a plethora of digital avenues to access illegal vaping devices and accessories. In fact, if one knows where to look, it isn’t hard to find them at all. Sellers mostly hawk their wares on Telegram (which has end-to-end encryption), but listings for vape products have popped up on Carousell, Lazada, and Shopee too. Non-encrypted technologies and online public marketplaces are easier to police, and in 2020, the HSA collaborated with social media platforms to remove over 2,000 of these listings. 

What exactly is the scale of the black market, though? CNA mentioned there were several groups with up to 10,000 members, which RICE has verified in our own investigation. At press time, some groups have grown closer to 20,000 members. Inside these group chats, new listings and offers are posted every second. Clearly, the removal of listings by HSA (presumably off non-encrypted platforms) has not significantly dented the black market activity on Telegram and WhatsApp.

And there have been debates to rethink the vape ban and instead regulate it. Perhaps, like the casinos, Singapore needs this tax revenue to keep abreast of the top cities around the world.

Should Singapore regulate vaping instead of banning it? | Heart of the Matter podcast (watch here)

Bans Aren’t Stopping Singapore’s Vapers. So What’s Next? (read here)

Making sense of the growing vape problem: Is regulating its use the solution? (read here)

Still, Singapore is keeping up the fight against vaping.

Significant increase in vape cases in Singapore; HSA steps up enforcement (read here)

Why ban vape but not cigarettes?

Why Singapore bans e-cigarettes (read here)

As explained in the article above: “In Singapore, the importation and sale of e-cigarettes have always been banned under the blanket prohibition on imitation tobacco products. In 2017, Singapore extended the ban to cover purchase, use and possession.

If we have our way from early on, we probably would have banned cigarettes at the outset. But it would be very challenging to do it now…

Let’s be clear. E-cigarettes are harmful.”

Nicotine is the primary agent in regular cigarettes and e-cigarettes, and it is highly addictive. It causes you to crave a smoke and suffer withdrawal symptoms if you ignore the craving. Nicotine is a toxic substance. It can harm parts of the brain that control attention, memory and learning, and may result in a permanent lowering of impulse control.

Nicotine can also adversely affect the heart, reproductive system, lungs and kidneys.

As Nicotine is highly addictive, it is difficult to quit smoking cigarettes and e-cigarettes. You can get hooked to e-cigarettes and later on, other tobacco products.”

Having said that, beyond e-cigarettes and vaping, the Singapore government has implemented a 15 per cent increase in tobacco excise duty across all tobacco products, which took effect on Tuesday (Feb 14). Taxes for cigars, cheroots, cigarillos and cigarettes, and other manufactured tobacco will be raised from S$427 per kg or 42.7 Singapore cents per stick of cigarette, to S$491/kg or 49.1 cents per stick. The increase is expected to generate about S$100 million in additional revenue per year.

We would probably be better off not getting this tax revenue

Personally, I do hope that Singapore wins its fight against e-cigarettes and vaping. No doubt the tax revenue would be a helpful boost to the country’s budget and allow the country to be in a more sustainable fiscal position (if e-cigarettes and vaping are instead allowed and regulated, instead of it being banned).

However, the health problems caused to people, especially the youths, hooked onto its nicotine. In the end, a lifetime of health issues. It would not be beneficial to the well-being of the broad middle of society.

Thank you for reading.


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Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat. Check out my Facebook Page: https://www.facebook.com/apenquotes.tte.9?ref=bookmarks
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