Taxing choices: Thai Excise Department ponders single rate or weighty decision for cigarettes

Ekniti Nitithanprapas, Excise Department Director-General, announced that the department is deliberating over whether to implement a single tax rate or a weight-based tax for cigarettes. Currently, the tax structure is a two-tier system, with a 25% tax applied to cigarette packs retailing at up to 72 baht (US$2), aimed at reducing the impact on low-income individuals.

Packs costing more than 72 baht are taxed at 42%. An additional flat-rate tax of 1.25 baht (US$0.036) per cigarette is also applied, regardless of the pack’s retail price.

The two-tier system, according to Ekniti, has led to cigarette manufacturers selling packs for 72 baht or less to avoid higher tax rates. If a single tax rate is to be implemented, it must balance the income of farmers, public health, government revenue and the prevention of the smuggling of cheaper foreign brands.

This single rate, if chosen, should fall between 25% and 42%. However, further study is needed to assess the potential impact of a single tax rate. The previous two-tier tax structure, which expired in September 2021, taxed packs priced up to 60 baht at 20%, and those above 60 baht (US$1.72) at 40%, reported Bangkok Post.

A 40% flat tax rate was supposed to be implemented in October 2021, but opposition from the tobacco authority and tobacco farmers halted the move, as the single-tier rate could impact the income of both parties.

The Finance Ministry, led by the Excise Department, has been tasked by the Cabinet to study the cigarette tax structure for the medium and long term to determine a fair and appropriate single-tier rate. This will take into account factors such as market competition and public health.

Additionally, the Tobacco Authority of Thailand has been assigned by the Cabinet to encourage tobacco farmers to switch to other crops, owing to long-term health and environmental concerns. The Thai Health Promotion Foundation will provide technical assistance to facilitate this transition.

Simultaneously, the government introduces a 0% tax on local alcohol to boost tourism and economic growth, aligning with broader reviews of excise and duty-free shop considerations.