From the Royal Address to Real Action: Why Malaysia Needs Annual Tobacco Tax Increases

Prepared by Muhammad Daniel Kittu

28 January 2026

During the Royal Address of His Majesty Sultan Ibrahim, King of Malaysia, health, among other fields, was emphasised as a key priority under the implementation of the 13th Malaysia Plan (13MP), with a clear focus on improving the well-being of the people.

When the 13MP was tabled last year, Prime Minister Datuk Seri Anwar Ibrahim announced an expansion of pro-health taxes, including on tobacco. Budget 2026 introduced a modest increase in tobacco taxes, with cigarette excise duties rising by 2 sen per stick, resulting in higher cigarette prices since November of last year. While this is a welcome step, one-off and sporadic increases are not enough. More can and should be done, especially given the significance of health in implementing the 13MP to improve well-being.

Why Annual Increases Are Necessary

Tobacco use continues to take a devastating toll. Around 27,000 deaths occur annually due to tobacco use in Malaysia. The first tobacco tax increase in a decade is progress, but without regular adjustments, its impact will quickly be eroded by rising GDP per capita and inflation. This is why mandating annual increases in tobacco taxes is essential if cigarettes are to become less affordable over time and smoking rates are to decline meaningfully.

Annual increases in tobacco taxes are not only in line with the 13MP’s goal of expanding pro-health taxation, but it also provides an additional source of revenue to fund public programmes, including the Ministry of Health’s lung health initiatives, smoking cessation services, and prevention campaigns, ensuring that tobacco taxes directly support better health outcomes. 

International Best Practice 

Implementing such a policy would be consistent with international best practice and the recommendations of the World Health Organisation (WHO) Framework Convention on Tobacco Control. 

Malaysia would not be venturing into uncharted territory. The Philippines, for example, has implemented annual tobacco tax increases since the enactment of its 2012 Sin Tax Act. This approach has been widely recognised as a success, contributing to reduced smoking rates while generating revenue to fund universal healthcare.

Malaysia’s Progress in Tobacco Control

Malaysia has made notable progress in other areas of tobacco control. Most recently, this includes the ban on the open display of cigarettes and other tobacco and nicotine products, such as heated tobacco products and vapes.  

The upcoming ban on vapes further signals the government is not slowing down when it comes to protecting public health. However, regulatory measures must be complemented by strong fiscal policies. Strengthening tobacco taxes through annual increases would help deter vape users, especially youth, from switching to conventional cigarettes. Meanwhile, the additional revenue could be used to fund treatment and support programmes for nicotine addiction. Such a policy would be fully in line with the aspirations of the 13MP and the King’s call to prioritise health in its implementation.

Misplaced Concerns Surrounding Illicit Trade

Critics of higher tobacco taxes often argue that this will fuel the illicit trade of cigarettes, depriving the government of the additional tax revenue and undermining public health goals. This argument is repeatedly raised, yet evidence consistently shows otherwise. 

Numerous studies have demonstrated that weak enforcement, not taxation levels, is the primary driver of illicit cigarette trade. Research by Universiti Putra Malaysia has shown that higher tobacco taxation is a proven tool for reducing smoking rates without significantly fuelling illicit trade while also raising government revenue. A 2019 World Bank study reached similar conclusions.

Encouragingly, enforcement against illicit trade has improved. In 2025, the Royal Malaysian Customs Department (JKDM) foiled 7,097 attempts at smuggling and duty evasion and surpassed revenue projections by RM 8.93 billion. The additional RM 700 million allocation in Budget 2026 to enforcement agencies will further strengthen these efforts. Just as enforcement continues to be enhanced, so should tobacco tax policy. Higher tobacco taxes can themselves provide an additional source of funding for the government to strengthen enforcement where needed. 

The government should seize this opportunity and double its efforts and continue pursuing a multi-pronged approach to tobacco control, which incorporates regulation, enforcement and effective taxation. 

Time for Progressive Policies to Improve Health

The harms of smoking do not stop with smokers alone. Exposure extends beyond second-hand smoke. Scientific evidence increasingly shows that toxic residues from tobacco smoke linger on clothing, furniture, walls, and other surfaces. According to the WHO and the American Academy of Paediatrics, this phenomenon is known as third-hand smoke. These invisible toxins can be inhaled or absorbed through the skin, posing particular risks to children, pregnant women, and workers in enclosed environments. Even those who choose not to smoke are not fully protected.

Smoking also places a significant financial burden on society as a whole. Treating tobacco-related illness strains an already overstretched health system, diverts limited healthcare resources, and increases healthcare costs borne by all Malaysians as taxpayers. Productivity losses and premature death further compound this burden.

Given all this, Malaysia must adopt a long-term, forward-looking policy. Mandating annual tobacco tax increases would ensure that cigarettes become progressively less affordable, better reflect the true social and economic cost of smoking, and generate resources to support public health. If we are serious about improving well-being under the 13th Malaysia Plan, this is a step we can no longer afford to delay.