The Excise Department will impose a cigarette tax based on tiered pricing, with expensive brands charged a higher rate than cheaper ones, with a goal of striking a balance between public health and government revenue.
Imposing a single rate tax regardless of cigarette prices will take a toll on cheap cigarettes produced by Thailand Tobacco Monopoly, while expensive cigarette brands will benefit, said an informed source at the Finance Ministry. Such a tax structure could encourage people to smoke imported cigarettes, said the source.
Moreover, a single excise tax rate for cigarettes could affect the Excise Department's revenue if the rate is set too low, but it could hurt low-income smokers if the rate is too high, the source said.
A new excise duty on cigarettes is part of the new excise law, in which suggested retail prices will replace the existing ex-factory price and cost, insurance and freight (CIF) values as a base for excise tax computation. The change is aimed at creating a fairer system for manufacturers and importers after some businesses were found to have understated their tax bills.
The new excise law is scheduled for enforcement on Sept 16.
The new excise duty rates for alcohol, cigarettes and playing cards are set to go before the cabinet for approval tomorrow to ward off stockpiling ahead of the effective date. The cabinet recently approved organic laws concerning the new excise tax rates, which will apply to all 21 products subject to excise duties except alcohol, cigarettes and playing cards.
Even though the Excise Department will adopt the tax neutrality concept for the change in tax base calculation, some products, particularly sugar-sweetened ready-to-drink tea and coffee, will lose its excise duty-free privilege, while other soft drinks with added sugar will be subject to a higher tax bill two years after the new law is enforced if they fail to lower sugar content.
The sugary drink tax will see one-litre bottles and cans of soft drinks with sugar content of 0-6 milligrammes as tax exempt, while more than 6 to 8mg will be subject to a 10-satang tax. Those with more than 8 to 10mg will be taxed 30 satang, more than 10 to 14mg 50 satang, and more than 14mg will be hit with a levy of one baht.
The source said the tiered pricing concept will not breach the World Trade Organization's principles of free trade as both locally made and imported cigarettes will be charged the same duty if their suggested retail prices are the same.
Wine already has a tiered excise tax based on retail prices, the source said.
Malika Bhumivarn, a partner at Bolliger & Co Consulting Ltd and a specialist on trade and customs, disagreed with tiered pricing for alcohol and cigarettes, saying products with equal harm to health should be levied at the same rate.
Moreover, alcohol and cigarettes are major excise tax contributors, so their tax structure should be simple to discourage tax evasion and reduce loopholes, she said.
The experience of other countries and international organisations suggests a tiered-tax system reduces efficiency in collecting such taxes, said Ms Malika. She said the Excise Department should be more concerned with its key information, the ease of doing business to encourage entrepreneurs, and linking information among tax-collecting agencies.
