KUALA LUMPUR, August 20 — The government’s collection of excise duties on e-cigarette and vape liquids containing nicotine will be invalidated if the removal of liquid nicotine from the Poisons List is repealed, according to the Ministry of Finance (MOF).
Treasury secretary-general Johan Mahmood Merican said in an October 5, 2023 affidavit filed in the High Court here that after parliamentary passage of Budget 2023 – which included a proposal to tax nicotine-containing e-liquids – the MOF informed the Ministry of Health (MOH) to take action in line with that decision by removing the substances from control under the Poisons Act 1952 (Act 366).
Then-Health Minister Dr Zaliha Mustafa gazetted an order on March 31, 2023 to exempt liquid and gel nicotine used in e-cigarettes and vape from the Poisons List.
MOF made amendments to six subsidiary legislations under the finance minister’s authority that took effect on April 1, 2023. A day later, the ministry announced excise duties of 40 sen per ml for nicotine-containing liquids or gels used for e-cigarettes and vape.
Collection of these excise duties was enforced on May 1, 2023.
MOF also gazetted five additional subsidiary legislations under the Excise Act 1976 and Customs Act 1967 to enable the taxation of e-cigarette and vape disposables containing liquid or gel nicotine that took effect on May 1, 2023.
“I verily say that if the Impugned Order is cancelled, it will affect other subsidiary legislations…as above and will subsequently invalidate the government’s collection of excise duties,” Johan said in his 2023 affidavit, referring to the health minister’s exemption order.
“I verily say that the government’s intention via Budget 2023 saw results when excise duties on liquid or gel nicotine used in electronic cigarettes and vape were collected from May 2023 to August 2023.
“Like what was announced in Budget 2023, the government agreed that half of the excise duty revenue would be reallocated to the Health Ministry as an effort to improve the quality of health care services.”
Health Minister Dzulkefly Ahmad told the Dewan Negara in a written reply last July 28 that the government collected RM354.51 million in excise duty on e-cigarette and vape products in about three years between May 2023 and June 11, 2026.
Parts of Johan’s affidavit were cited by then-High Court judge Aliza Sulaiman, who is now a Court of Appeal judge, in her full written judgement last July 24 on a judicial review application by three non-governmental organisations (NGOs) against the exemption of liquid nicotine from the Poisons List.
She decided in favour of the applicants in May, ruling that the declassification of liquid nicotine as a scheduled poison was “irrational” or unlawful, and that it was done without proper or adequate consultation with the Poisons Board.
Last Tuesday, the health minister and government dropped their appeal against the High Court verdict, which means that Putrajaya is upholding the court’s nullification of the removal of liquid nicotine from the Poisons List.
Hence, it’s unclear if the government must refund tobacco and vape companies at least RM354 million in excise duties collected unlawfully, as per Johan’s statement three years ago, or if these companies may consider suing the government for their tax refunds.
Attorney-General Mohd Dusuki Mokhtar told New Straits Times yesterday that the government decided to drop its appeal because the Control of Smoking Products for Public Health Act 2024 (Act 852) provided a sufficient legal framework to regulate the sale and use of nicotine-containing vape products. Act 852 doesn’t ban nicotine vape but merely prohibits it for minors aged under 18.
However, he didn’t explain the legal status of liquid nicotine under the Poisons Act that restricts its dispensation, as a Group C poison, to licensed pharmacists or registered medical practitioners.
This was the very reason why MOF directed the MOH to exempt liquid nicotine from the Poisons List in the first place—in order to tax a product that would otherwise be illegal for sale outside of medical or pharmacy settings. Otherwise, the government could have simply waited for the enactment of Act 852 without needing to touch Act 366.
Crucially, Johan’s October 2023 affidavit made no mention of the Control of Smoking Products for Public Health Bill 2023; the first version of this bill was previously tabled in Parliament in June 2023, before it was retracted and a new bill without a generational end game (GEG) provision was tabled in November 2023 and subsequently came into force as Act 852.
The Malaysian Pharmacists Society has urged the government to clarify how Act 366 and Act 852 will operate together, following the High Court decision.
Neither MOH nor MOF have issued a statement to explain the legal and regulatory status of nicotine vape, subsequent to the discontinuance of the government’s appeal.
