Strict action on illicit trade is critical at this time to recover billions of ringgit that can then be channelled towards the COVID-19 economic recovery efforts, says Retail and Trade Brand Advocacy

Strict action on illicit trade is critical at this time to recover billions of ringgit that can then be channelled towards the COVID-19 economic recovery efforts, says Retail and Trade Brand Advocacy (RTBA), a non-governmental organisation.

It managing director Heath Michael said the COVID-19 pandemic, compounded by plummeting oil and commodity prices and trade restrictions, is having a devastating impact on global and regional economies.

“Every ringgit will count in the recovery, and radical action is needed from our government.

“This is all the more important given that the tax revenue to gross domestic product (GDP) ratio in Malaysia had declined progressively from 15.6 per cent in 2012 to 12.0 per cent in 2018 and 11.8 per cent in January-September 2019,” he said in a statement.

In Malaysia, the former finance minister Lim Guan Eng had stated recently that Malaysia’s shadow economy accounts for 21 per cent of GDP and amounts to an estimated RM300 billion annually.

Illicit trade forms a large part of this shadow economy.

“When compared with nearby countries, Malaysia’s shadow economy does not compare favourably.

“Research shows that cracking down on this criminal activity can recover billions of ringgit for the government,” he said.

According to an International Monetary Fund Working Paper, Malaysia’s average ratio during the 1991-2015 period was 31.5 per cent – higher than Singapore (11.9 per cent), Australia (12.1 per cent), China (14.7 per cent), Hong Kong (14.7 per cent), Vietnam (18.7 per cent), India (23.9 per cent), Indonesia (24.1 per cent) and South Korea (25.7 per cent).

Michael said a quick win strategies for governments is to shut down illicit trade include policies that addresses demand and supply factors, stricter border enforcement and enhanced collaborations at an intra-regional level.

“Times like these provide an excellent opportunity for countries to work together to support and rebuild economies,” he said.

RTBA defines illicit trade as smuggling, counterfeit and tax evasion activities that cause governments to lose tax revenues, legitimate businesses to be undermined and consumers being exposed to unregulated or unsafe products.

These products include counterfeited or smuggled luxury goods, electronic products, alcoholic beverages and cigarettes that are usually sold illegally on the black market.

In order to facilitate policy reforms and pro-active initiatives to protect legitimate businesses and retailers across the region from criminal conduct and illicit trade, RTBA will be expanding its presence by establishing regional offices in Asean countries, including Malaysia.