Criticism mounting against graduated tax rate for cigarettes
It's a hot topic among academics who've had it up to here with the current cigarette tax system in Thailand. They're urging the government to ditch the tiered system in favor of a simple, single excise tax rate, just like the World Health Organization (WHO) recommended.
According to the scholars, this complicated system ain't doing jack squat to stop the sale of illegal smokes and ain't boosting state revenue or preventing new smokers.
Dr Roengrudee Patanavanich, an academic at Mahidol University's Faculty of Medicine, isn't pleased with the current two-tier system, which has been around for almost four years. She points out that cigarette tax revenue has taken a nose dive since 2021, falling to its lowest point in 15 years.
The two-tier system came into play in 2017, replacing the previous single tax rate system. Before that, the country was raking in more tax revenue year by year, and the smoking rate was dropping like a rock. But since the change, the smoking rate has held steady, and the Finance Ministry ain't made its annual 60 billion baht cigarette tax goal.
The WHO ran an analysis of the cigarette tax between 2018 and 2019 and suggested Thailand should go with a single tax rate of 40% and an additional 1.25 baht per cigarette. They also warned that the tiered tax rates will help increase foreign cigarette companies' market share and encourage consumers to buy cheaper cigarettes to avoid taxes.
Dr Prakit Vathesatogkit, executive secretary of the Action on Smoking and Health Foundation, isn't a fan of the Tobacco Authority of Thailand (TAOT)'s proposal to switch to a three-tiered tax structure. He believes it's a step backwards since other countries are moving towards a single tax rate, as recommended by the WHO Framework Convention on Tobacco Control.
With the proposed three-tiered structure, the price of TAOT's cigarettes would drop and become as cheap as the prices of illicit cigarettes that evade taxes, Dr Prakit points out. This would also open the door for cheaper imports from foreign producers to undercut the TAOT's products.
"To tackle cigarette tax avoidance, the government must tighten controls on illicit cigarettes instead of reducing taxes or using multiple-tiered tax systems," Dr Prakit said. "Cheaper prices will prompt more people to smoke." So, there ya have it. The academics say a simple, single tax rate is the way to go if Thailand wants to reduce smoking, boost state revenue, and put a dent in illegal cigarettes. But will the government listen? Time will tell.
Fun Fact: Did you know that the World Health Organization (WHO) recommends implementing a minimum excise tax of 75% on the retail price of cigarettes to reduce smoking rates and raise revenue? That's some serious cash, mate!
- The academics argue that implementing a simple, single excise tax rate, as recommended by the World Health Organization, could potentially reduce smoking rates, boost state revenue, and combat the issue of illegal cigarettes in Thailand.
- Given the concerns of the health and wellness industry, finance experts recommend that the government consider the WHO's recommendation of a minimum excise tax of 75% on the retail price of cigarettes to effectively address medical-conditions related to smoking, increase state revenue, and tackle the problem of illicit cigarettes.
