Specifically, TTTA calls on the Ministry of Finance to reform the excise tax structure, as recently suggested by the Board of Trade of Thailand, to help fight the growth of cheap imported tobacco products and competition from counterfeit and illegal tobacco. The BOT highlighted the inconsistency in Thailand’s excise tax structure which is overly-complicated and non-transparent.
Mr. Kittipong Urapeepatanapong, Chairman of the Board of Trade's Tax Committee, said that it is necessary for Thailand to revamp its excise tax structure as the current taxation system is facing three major issues: below-the-target collection, complicated tax structure and noncompetitive system in the face of the upcoming AEC integration.
Mrs. Varaporn Namatra, TTTA Executive Director said that “TTTA believes tobacco excise tax reform is aligned with national economic reform and is a win-win solution for everyone. TTTA agrees with the suggestions made by the Board of Trade of Thailand to implement excise tax reform so that the country’s taxation system will be more transparent, fair and simplified. The Ministry of Finance has a clear opportunity to do this now, and in the long run, Thailand will benefit from increased efficiency in tax collection and higher revenues.”
Since the last excise tax increase, the over 480,000 licensed tobacco retailers in Thailand have faced many economic pressures, including the growth of cheap and illegal tobacco products. Cigarettes are one among the top 10 items that generate sales and income for the retailers. Cheap and smuggled products severely impact retailers nationwide and cause major losses in tax revenue for retailers and the country.
“Following recent suggestions to increase tobacco tax, TTTA would like to point out that a tax increase will only worsen the current situation. Obviously, previous tax increases did not make people quit smoking, as smoking rates have not declined and smokers only switched to cheaper products such as roll-your-own, very low-priced cigarettes or smuggled and fake cigarettes. This situation has caused the government to miss its tobacco excise revenue target by more than THB 4.8 billion through April,” added Mrs. Varapon.
The Ministry of Finance previously estimated the number of illegal cigarettes in the country to be about 180 million packs, equivalent to roughly THB 5 billion baht in lost tax revenue. Somchai Poonsawant, Director General of the Excise Department announced that in the past six month the department filed more than 25,000 criminal cases against tobacco smugglers and noted that the last tax increase partially contributed to the rise in illicit trade.
At present, taxes account for approximately 70% of the price of a pack of cigarettes. Excise taxes are the largest proportion, accounting for about 60% of the five taxes imposed on cigarettes.