Cheap cigarettes could see tax hike of 10 baht per pack

Smokers could be required to pay an additional 10 baht per pack for low-priced cigarettes after the new excise rate takes effect on Saturday, while the levy on expensive brands will be increased at a lower rate with the aim of narrowing the price gap between the two segments, says a source at the Finance Ministry.

Under the new tax structure, cigarettes will be liable for tax both in terms of volume and value, regardless of price, the source said.

The new levy in terms of volume will be increased to 1.20 baht per cigarette from 1.10 baht at present plus the tax based on value, which will be divided into two rates -- 20% of suggested retail price for cigarettes priced below 60 baht per pack and 40% for those priced more than 60 baht.

The source cited a cigarette brand priced at 40 baht per pack as an example. It will be taxed two baht in terms of volume and another eight baht in terms of value, constituting the additional 10 baht tax per pack.

At present, low-priced cigarettes are only subject to the tax rate based on volume.

But how much more smokers must pay depends on whether manufacturers want to pass on the entire tax burden to consumers, the source said.

For alcoholic drinks, the source said those with a greater percentage of alcohol will be charged at a higher rate, but the new tax burden for most of them will not change significantly, unlike for cigarettes, the source said.

The excise tax hike for low-priced cigarettes is intended to comply with the Public Health Ministry, which aims to reduce easy access to cigarettes, the source said.

The new tobacco excise tax structure is aimed at a gradual increase in low-priced cigarettes to make prices for cheap and expensive brands closer, the source said, adding that the tax hike for low-priced cigarettes could be seen in the next two years to further narrow the gap.

At present, the cheapest cigarette brand is priced at 40 baht a pack, compared with 165 baht for the upper end. Most cheap cigarettes are made locally by Thailand Tobacco Monopoly.

Earlier, another source at the Finance Ministry said the Excise Department would impose a cigarette tax based on tiered pricing with a goal of striking a balance between public health and government revenue.

The cabinet earlier this week approved ministerial regulations to set the new excise tax rates for alcohol, cigarettes and playing cards, part of a change in the excise tax base calculation to suggested retail price from the existing ex-factory price and cost, insurance and freight values.

The change is aimed at creating a fairer system for manufacturers and importers after some businesses were found to have understated their tax bills.

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