Criticism mounts over proposed graduated tax structure for cigarettes
Critics are slamming the current cigarette tax system in Thailand, calling for a restructuring to a single excise tax rate, as suggested by the World Health Organization (WHO). They claim the two-tiered system isn't doing squat to suppress illegal cigarettes and hasn't boosted state revenue or deterred new smokers.
It's no secret that the Excise Department's looking into a new tax structure for cigarettes, aiming to replace the current setup that's been in place for nearly four years. Dr. Roengrudee Patanavanich, an academic from Mahidol University's Faculty of Medicine, calls it a disaster. The two-tier tax system, she says, has left tax revenue shrinking like a wet dissolving candy. From 64.2 billion baht in 2021 to a mere 51.24 billion baht last year – the lowest in 15 years!
According to the two-tiered system, a 25% tax is slapped on packs with a retail price up to 72 baht to ease the burden on low-income earners. On the other hand, those priced higher than 72 baht get hit with a 42% tax. Every pack carries an additional tax of 1.25 baht per cigarette, making that one pack liable for a 25 baht tax. However, Dr. Roengrudee points out that the decrease in cigarette tax revenue started when the single excise tax rate was replaced by the two-tiered system back in 2017. Before then, cigarette tax revenue was on the rise, from 13.6 billion baht in 1990 to 68.6 billion in 2017. During this period, the country's smoking rate dropped from 31% to 19.1%. But since the two-tiered tax system was introduced, the smoking rate hasn't budged and the Finance Ministry has failed to meet its goal of collecting 60 billion baht a year in cigarette taxes. The WHO presented its analysis of the cigarette tax between 2018 and 2019 to the Excise Department, suggesting Thailand adopt a single tax rate of 40% and an additional tax of 1.25 baht per cigarette.
Dr. Prakit Vathesatogkit, executive secretary of the Action on Smoking and Health Foundation, disagrees with the Tobacco Authority of Thailand (TAOT) proposal to switch to a three-tiered tax structure. He calls it a step backward, as other countries are moving towards a single tax rate, in line with the WHO Framework Convention on Tobacco Control. With the proposed three-tiered structure, the price of TAOT-produced cigarettes would plummet, making them no different from cheaper illicit cigarettes that manage to avoid taxes. This, in turn, would lead to cheaper cigarettes being imported to compete with TAOT's cigarettes. "In order to crackdown on tax avoidance on cigarettes, the government must focus more on tightening controls on illicit cigarettes, rather than reducing taxes or using multiple-tiered tax systems," Dr. Prakit warns. "Lower prices will only encourage more people to light up."
- Critics are advocating for a transformation of the cigarette tax system in Thailand, suggesting a shift towards a single excise tax rate, like the one proposed by the World Health Organization (WHO).
- Dr. Roengrudee Patanavanich, a medical academic from Mahidol University, has labeled the current two-tier tax system a disaster, as it has resulted in a shrinking tax revenue, causing concern within the financial industry.
- The two-tiered system places a 25% tax on packs with a retail price up to 72 baht, while those priced higher are subjected to a 42% tax, with an additional 1.25 baht per cigarette.
- Health and wellness advocates argue that the decrease in cigarette tax revenue started when the two-tiered system replaced the single excise tax rate in 2017, a move that coincided with a stagnant smoking rate and the Finance Ministry's inability to meet its cigarette tax collection goal of 60 billion baht a year.
- In response to the Tobacco Authority of Thailand's (TAOT) proposal for a three-tiered tax structure, Dr. Prakit Vathesatogkit, executive secretary of the Action on Smoking and Health Foundation, has expressed disagreement, highlighting the potential for increased cigarette consumption and health-related issues.
- He argues that instead of reducing taxes or implementing multiple-tiered tax systems, the government should focus more on tightening controls on illicit cigarettes to combat tax avoidance, emphasizing the importance of education and self-development in understanding the detrimental effects of smoking on personal-finance and career-development.
- The World Health Organization's (WHO) 2018-2019 analysis suggested Thailand adopt a single tax rate of 40% and an additional 1.25 baht per cigarette, a move that could help boost state revenue and promote health-and-wellness initiatives.
- As countries worldwide move towards a single tax rate for cigarettes, in compliance with the WHO Framework Convention on Tobacco Control, the cigarette tax debate in Thailand continues to be a subject of intense discussion within the business community and among health and wellness advocates.
