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.

"There is still plenty of time. We have to change our strategy. We have been so far stimulating the economy. We are studying various suggestions on how to have a paradigm shift in terms of policies, taxation and allocation of funds," he said.

The 2003 budget is expected to be presented to parliament on Sept 20.

Economists have urged Malaysia to slash taxes and encourage talent from overseas to boost the country's flagging foreign investment.

The call comes as Kuala Lumpur prepares to announce new strategies to attract hi-tech multinational firms crucial for economic growth.