Prime Minister Dr Mahathir Mohamad today said the government is considering higher taxes on tobacco and alcohol in the 2003 budget.

But Mahathir, who is also the finance minister, said any change must be given careful consideration as it could result in smuggling.

"We are still looking at this. The problem with increasing taxes for tobacco companies is that it (can) cause (an increase in) smuggling.

"Increasing tobacco taxes does not increase revenue for us. We have to be very careful on whether to increase this kind of tax," Mahathir told reporters at a taxation conference.

Mahathir also said the government is studying various suggestions for the 2003 budget.