Illicit beer costs Malaysian government $78m

Smuggled, counterfeit and unregulated foreign beer in Malaysia is costing the government there US$78 million a year in lost taxes.

Industry sources in the country have reported that Malaysians are increasingly switching to beer imported from Thailand, the Philippines, China and Europe, as they are sold at half the price of Malay beers and are stronger in alcohol.

According to the Jakarta Post, the change means the government is losing up to 250m Malaysian ringgit ($78m) a year while total losses from alcohol tax evasion could be as high as MYR1bn.

A recent report cited in the paper said: “The supply of cheap foreign beer, with a higher-than-average alcohol volume, has increased five-fold in the past five to seven years. In the past, such beer could be found in smaller sundry shops in suburban areas, and stocked at the rear of the stores.

“But recently, the beer has made its way into 60% of retail outlets, mostly small retailers such as sundry shops and liquor shops.

“They have also gained ground and are now even found in some major supermarkets and with liquor distributors.”

Malaysians are deserting local beers because excise duty is so high but this has led to questions as to how foreign beers are so much cheaper.

Import tax alone should be MYR5 ($1.5) per litre on most foreign beers yet it is apparently possible to buy a 330ml can of foreign beer with twice the alcoholic content of local beer for MYR4.29 or MYR7 for a 550ml can.

The fear is that a great many of the beers in question have either been smuggled in or are counterfeit, which led Domestic Trade, Cooperatives and Consumerism minister, Hasan Malek, to announce that the ministry was working with other agencies to counter the problem.

The problem has parallels with the UK government’s recent announcement that illicit alcohol costs the Treasury up to £700m a year in revenue losses.