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Restaurant owners' group raises concern over hike in tobacco, alcohol excise duties

  //food-wine.news-articles.net/content/2025/10/16 .. -over-hike-in-tobacco-alcohol-excise-duties.html
  Published in Food and Wine on Thursday, October 16th 2025 at 22:34 GMT by Free Malaysia Today
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Restaurant Group Raises Concern Over Tobacco & Alcohol Excise Duties Hike

On 15 October 2025, the Free Malaysia Today reported a sharp rise in the excise duties on tobacco and alcoholic beverages, a move that has sent shockwaves through the hospitality sector. A coalition of restaurant owners, representing a wide spectrum of dining establishments—from high‑end bistros to local hawker stalls—has voiced alarm over the economic repercussions of the new tax regime. The group’s concerns centre on the affordability of menu items, the viability of small businesses, and the broader social impact of the hike.

The Tax Increase

The Malaysian Ministry of Finance announced a multi‑tiered increase in excise duties effective 1 November 2025. According to the ministerial press release, the duty on cigarettes rose from RM 0.50 to RM 0.75 per cigarette, while the duty on beer increased from RM 0.15 to RM 0.20 per litre. Spirits saw a more dramatic hike, with duties climbing from RM 0.40 to RM 0.60 per litre. The escalation is part of a broader strategy to boost revenue for health and education initiatives, as well as to discourage smoking and excessive alcohol consumption among Malaysians.

The press release further detailed that the excise duty hike is earmarked for funding the National Health Programme, which aims to expand smoking cessation clinics and subsidise treatment for alcohol‑related illnesses. It also earmarks funds for a “Youth Engagement Fund” intended to provide scholarships and vocational training to at‑risk youth.

Impact on the Restaurant Industry

The restaurant group’s concerns revolve around the immediate cost pressure they face. With excise duties now a larger portion of the wholesale cost of drinks, many establishments are forced to decide whether to absorb the cost or pass it on to consumers. “We’re already operating on thin margins,” said a spokesperson for the group, citing the average net profit margin for restaurants in Malaysia as hovering around 4‑6 %. “Any additional cost that is not offset by higher sales will jeopardise our sustainability.”

A survey conducted by the group in September 2025 found that 68 % of respondents were planning to increase the price of alcoholic drinks by 10‑15 % to cover the new duty, while 22 % considered reducing the variety of imported spirits to limit cost inflations. Even the latter approach could disappoint customers who favour premium imported beverages, potentially affecting customer loyalty and revenue streams.

The group also highlighted that the rise in excise duties may alter consumer behaviour. While the government hopes to reduce smoking and alcohol consumption, restaurants fear that customers might shift to cheaper, unregulated alternatives. In one interview, a popular local chain revealed that they have already begun offering a range of low‑price beer and cider options in response to the tax hike.

Small Businesses in the Crosshairs

The issue is particularly acute for smaller, family‑run eateries and night‑market stalls that rely heavily on alcoholic drinks for their income. These businesses have limited capacity to absorb cost increases or to re‑price products without alienating their customer base. The restaurant group’s chief executive argued that the tax hike is a “taxation without consideration” for the micro‑entrepreneurial ecosystem that fuels Malaysia’s culinary diversity.

In a follow‑up article, the group cited an example of a 12‑seat hawker stall that has been operating for over 20 years and has had to cut back on its alcoholic menu to stay afloat. “We are no longer allowed to offer the same range of spirits,” the stall owner lamented. “Customers now avoid the stall entirely because we cannot match the prices at bigger chains.”

Government Response

In response to the backlash, a spokesperson for the Ministry of Finance reiterated that the duty hike was a measured approach, designed to be “phased and monitored” over the next 18 months. The ministry assured that the additional revenue will be transparently allocated towards health and education, thereby benefiting the broader community. They also announced that small businesses would receive a one‑time tax relief voucher to offset the initial impact of the duty increase.

The spokesperson added that the government would consider a “social dialogue” with industry groups to refine the implementation. However, the timeline for such dialogue remains unclear.

The Bigger Picture

The excise duty hike reflects a global trend of governments using taxation to curb consumption of harmful products. The Malaysian policy aligns with initiatives in countries like Australia and the UK, which have imposed similar taxes on cigarettes and alcohol to reduce health risks and raise revenue. However, the efficacy of such measures in the Malaysian context remains to be seen.

The restaurant group’s concerns highlight a delicate balance: while public health is a legitimate goal, the economic fallout for a vital sector of the economy cannot be overlooked. The challenge for policymakers will be to find a path that protects public health without crushing the livelihoods of countless restaurant workers and small business owners.

As the industry prepares for the new tax regime, many will be watching to see whether the projected health benefits materialise, and how the hospitality sector will adapt to a market where the cost of a simple glass of wine or a cigarette has significantly increased.