A supermarket worker gets cigarettes for a customer. The excise department is rushing to determine the tax structure for tobacco. (Photo by Wichan Charoenkiatpakul)
The Excise Department is reviewing the excise structure for cigarettes to strike a balance between public revenues, farmers’ incomes, public health and the fight against illegal cigarettes.
The current tobacco tax structure calls for a 20% tax rate to be applied to the retail price for packs up to 60 baht. If the retail price exceeds 60 baht per pack, a 40% tax rate will be applied.
A flat tax rate of 40% should be applied since October 2019, regardless of the retail price.
The Treasury Department had previously asked the cabinet to extend the two-tier tobacco tax rate until the end of September this year. The extension has now been extended to September 2021.
There have also been requests from the Thai Tobacco Authority (TOAT), which monopolizes domestic tobacco production, and tobacco growers for the excise department to review the 40% flat rate tax rate because such a one-tier tax rate affects the income of the TOAT farmers.
The department is rushing to draw a conclusion on the tobacco excise structure as the single-tier tax law has been postponed twice, said Lavaron Sangsnit, director general of the excise department.
The tobacco excise structure will take into account four main factors, Lavaron said. They include generating income for the country, generating incomes for tobacco farmers, preventing smoking, and competing with illegal cigarette products.
“The government has extended the delay in implementing the law in the past, but I don’t want to. There needs to be a clear conclusion on the excise structure for cigarettes that matches the four factors above,” he said.
“The tax rate must also be set appropriately, neither too high nor too low. Otherwise, the number of smuggled cigarettes will increase and the excise department will waste time arresting them [offenders]. “
The department is currently looking into whether to tax cigarettes with a one-tier system or keep the existing two-tier system, Lavaron said.
Both domestic and foreign cigarette manufacturers want clarity on the excise tax structure in order to plan their sales price strategy.
If the excise tax rate made cigarette packs 3 to 5 baht more expensive, it would have a profound impact on the entire cigarette market, he said.
Regarding illegal cigarette management, the excise department will use e-stamp technology to verify the source of production and tax payment. This process is in line with the World Health Organization’s Framework Convention on Tobacco Control, Lavaron said.