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Controlling smoking 

RAM Holdings Bhd chief economist Dr Yeah Kim Leng says as cigarette smoking was an inelastic demand, habitual smokers were unlikely to kick the habit any time soon.

"The effect of a tax hike is that it must be high enough to reduce the level of smoking and deter new smokers. It's hard to deter habitual smokers by increasing price alone," he says.

"The recent tax increase will likely eat into the pockets of the lower disposable income group, who, unable to kick the habit, would definitely resort to cheap or illegal cigarettes. This can result in a loss in revenue to the Government," Yeah adds.

In a newspaper report last month, the Royal Malaysian Customs said illicit cigarette trade rose 11% to 36.7% of the country's total cigarette industry in the first half of 2009, costing the Government an estimated RM1.5bil in unpaid taxes.

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