# Malaysia loses $775m yearly to illegal cigarettes

> Illicit tobacco now makes up 55% of the market, costing the government more in lost taxes than it collects from legal sales.
- Title: Malaysia loses $775m yearly to illegal cigarettes · Malay Mail
- Summary: Illicit tobacco now makes up 55% of the market, costing the government more in lost taxes than it collects from legal sales. High tobacco taxes backfire when…
- Keywords: malaysia, illicit tobacco, tax revenue, center for market education, carmelo ferlito, asia-pacific, smuggling, excise tax, tobacco policy, pakistan, australia, indonesia
- Source: Malay Mail — https://malaymail.com/news/malaysia/2026/09/16/malaysia-loses-us775m-a-year-to-illicit-tobacco-trade-as-market-share-hits-55pc-study-finds/235373
- Author: Malay Mail
- Published: 2026-09-16T09:47:04+00:00
- Read time: 1 min
- Topics: malaysia, illicit tobacco, tax revenue, center for market education, carmelo ferlito, asia-pacific, smuggling, excise tax, tobacco policy, pakistan, australia, indonesia
## Malaysia bleeds $775m yearly
The country loses around $775 million in tax revenue each year to illicit tobacco. Illegal products now account for 55% of the entire tobacco market.
## Worst cases in the region
Malaysia's 55% illicit share ranks among the highest of 14 Asia-Pacific economies studied. Only Pakistan at 54% and Australia at 60% are comparable.
## Lost revenue exceeds collections
The money lost to illegal tobacco in Malaysia and Pakistan now surpasses what governments actually collect from legal tobacco taxes.
## Regional losses hit $15 billion
Across the region, governments collect $31 billion in tobacco taxes but lose another $15 billion to illicit trade. That's $48 lost for every $100 collected.
## Australia loses the most money
Australia recorded the largest revenue loss at $9.6 billion, followed by Indonesia at $1.65 billion despite having just 11% illicit market share.
## A tax policy problem
Illicit tobacco should be treated as a fiscal challenge, not just a law enforcement issue. Higher taxes don't work if consumers leave the legal market.

> The relevant question is not simply how heavily tobacco is taxed, but how much of that tax can actually be collected.
## High taxes can backfire
When taxation pushes consumers outside the legal market, governments undermine their own revenue goals. Collection matters more than tax rates.

> When taxation pushes an increasing share of consumers outside the legal market, governments risk undermining their own fiscal objectives.
## Gradual changes recommended
The study recommends gradual tax adjustments matched to enforcement capacity. Markets with high illicit shares may need temporary tax freezes.
## Enforcement must improve
Solutions require cooperation between tax authorities, customs, police and border agencies. Regional coordination is needed to tackle cross-border supply chains.
## Key takeaway

High tobacco taxes backfire when they push consumers to illegal markets, costing governments more revenue than they collect.