Galen Centre releases 2027 policy brief urging higher cigarette excise taxes

KUALA LUMPUR, 11 OCTOBER 2026 —

Malaysia’s Tobacco Tax Reform Urgently Needed as Galen Centre Demands RM0.65 Excise Hike per Stick in 2027

KUALA LUMPUR, 7 October 2026 — The Galen Centre for Health & Social Policy today called on the Malaysian government to end a decade of stagnation in cigarette excise duty by implementing a substantial RM0.65 per stick increase in Budget 2027, marking the first step in a five-year tax escalation to RM0.95 by 2031.

The proposal, outlined in a new briefing note, aims to curb smoking rates, generate over RM2 billion annually in additional revenue, and address the persistent challenge of illicit cigarettes—while ensuring lower-income smokers receive support to quit.

The briefing note, titled "Year 2027: Raise and Restructure Cigarette Excise Duty," argues that Malaysia’s current excise rate of RM0.42 per stick has failed to keep pace with inflation, rising incomes, and healthcare costs, leaving the government’s tobacco-control efforts ineffective.

The proposed RM0.65 increase—equivalent to a RM4.60 hike per 20-stick pack—would represent a far more aggressive adjustment than the mere 2-sen rise introduced in Budget 2026, which the Galen Centre described as a "token increase" that failed to restore the tax’s real value.

"Malaysia went for a decade without increasing cigarette excise duty," said Azrul Mohd Khalib, Chief Executive of the Galen Centre. "The two-sen increase introduced in Budget 2026 was an important first step, but it did not restore the real value of the tax after years of rising prices, incomes and healthcare costs. Budget 2027 should therefore not deliver another token increase.

Instead, it should mark the beginning of a structured and predictable tobacco-tax reform that strengthens commitment towards a nicotine-free generation."

The briefing note frames higher excise duties as a critical tool for public health and fiscal sustainability. Tobacco taxation remains one of the most cost-effective measures to reduce smoking prevalence, particularly among youth, while generating predictable revenue for the government. With adult smoking prevalence still at 19%, the proposed tax pathway could yield over RM2 billion annually by 2031, according to the Galen Centre’s projections.

However, the organisation warns that excise hikes alone will not suffice—success depends on a coordinated effort between the Ministry of Finance, the Ministry of Health (MOH), and the Royal Malaysian Customs Department.

A Multi-Pronged Approach to Combat Illicit Trade and Strengthen Enforcement One of the briefing note’s central arguments is that Malaysia’s illicit cigarette market—long cited as a reason to avoid tax increases—has persisted precisely because of stagnant excise rates. The Galen Centre asserts that raising duties while simultaneously strengthening enforcement is the only viable solution.

"Concerns over illicit cigarettes should no longer be used as a reason or excuse to keep tobacco taxes low," Azrul stated. "Unfortunately, Malaysia’s illicit cigarette market remained very large even during the decade when excise duties were frozen. Tax restraint did not solve the problem. The appropriate response is to raise excise duties while strengthening enforcement at the same time."

The briefing note recommends several key measures to complement the tax hike: - Enhanced coordination between Customs and MOH to improve border and supply-chain controls, including better tax-stamp integrity and independent monitoring of illicit trade. - Annual independent assessments of the illicit cigarette market, funded by non-industry sources, to provide transparent data on enforcement gaps.

- Allocation of tobacco-tax revenue to health initiatives, including smoking cessation programs, treatment for non-communicable diseases (NCDs), and enforcement of tobacco-control policies. - Expansion of affordable cessation support, particularly for lower-income smokers, who are most price-sensitive and thus most likely to quit with financial incentives.

The Galen Centre emphasises that higher tobacco taxes are not inherently regressive. Lower-income smokers are disproportionately affected by tobacco-related diseases and healthcare costs, and price increases may actually encourage them to quit—reducing long-term financial burdens on households. The briefing note explicitly calls for pairing tax hikes with expanded access to nicotine-replacement therapy (NRT) and quit-smoking services to ensure smokers are not penalised but supported in their efforts to quit.

Regional and Domestic Policy Implications Malaysia’s approach to tobacco taxation has long been a point of comparison in Southeast Asia, where countries like Thailand and Singapore have implemented aggressive excise hikes as part of broader public health strategies. Thailand, for instance, has seen smoking rates decline sharply following sustained tax increases, while Singapore’s "sin tax" reforms have been credited with reducing youth smoking initiation.

In contrast, Malaysia’s decade-long freeze on excise duties—despite rising healthcare costs from tobacco-related illnesses—has left the country lagging behind regional peers in both public health outcomes and fiscal revenue potential.

Domestically, the Galen Centre’s call aligns with growing pressure from health advocates and economists to prioritise tobacco control as a cost-saving measure. The World Health Organization (WHO) estimates that tobacco-related diseases cost Malaysia billions annually in healthcare expenditures and lost productivity. A structured tax pathway, combined with enforcement and cessation support, could not only reduce smoking prevalence but also alleviate pressure on the national healthcare system.

Stakeholder Perspectives and Government Response While the Galen Centre’s briefing note does not include direct quotes from government officials, the organisation’s recommendations directly challenge the Ministry of Finance’s past reluctance to implement significant excise hikes. In Budget 2026, the government justified the 2-sen increase as a "balanced" approach, citing concerns over illicit trade and economic sensitivity.

However, the Galen Centre argues that this approach has failed to address the root causes of smoking and illicit market growth.

Industry stakeholders, including tobacco manufacturers, have historically opposed excise hikes, citing potential increases in black-market activity and job losses in the legal tobacco sector. However, the Galen Centre’s data suggests that illicit trade is not a consequence of higher taxes but rather a symptom of weak enforcement and tax evasion. The briefing note argues that a combination of higher duties and stronger regulatory oversight would reduce both legal and illegal cigarette consumption.

The Path Forward: Budget 2027 as a Turning Point The Galen Centre’s briefing note concludes with a clear demand for decisive action in Budget 2027. The organisation urges the Prime Minister and Minister of Finance to treat tobacco tax reform as a defining public health measure, committing to: - A RM0.65 per stick excise increase in 2027, with a structured pathway to RM0.95 by 2031.

- Allocation of additional tobacco-tax revenue to health programs, including cessation support and NCD treatment. - Intensified enforcement efforts by Customs and MOH to combat illicit trade.

"Budget 2027 should not be another missed opportunity," Azrul warned. "The Government has the evidence, the regulatory framework, and now a clear policy pathway. It should act. A meaningful increase in cigarette excise duty will save lives, reduce future healthcare costs, and strengthen public revenue. After ten years of delay, another token adjustment would simply prolong the problem."

With public health advocates, economists, and regional peers increasingly pushing for bold tobacco-control measures, Malaysia’s response to the Galen Centre’s recommendations will be closely watched. The coming months will determine whether Budget 2027 marks a turning point in Malaysia’s approach to tobacco taxation—or whether another opportunity to reform the system is lost.

Related: Azrul Mohd Khalib · Kuala Lumpur