New laws likely to drive cigarettes prices further, 21/03/11

Two bills on tobacco tax valuation to be considered by the cabinet tomorrow will push up retail prices of cigarettes, according to Pongpanu Svetarundra, director-general of the Excise Department of the Finance Ministry.

Mr Pongpanu said one bill would call for taxes to be calculated from the retail prices of cigarettes instead of the ex-factory prices of the state enterprise Thailand Tobacco Monopoly for local cigarettes and the CIF (cost, insurance and freight) prices of imported cigarettes, as is the case today.

“It is too difficult to verify the CIF prices. How do we know each factory’s cost of production? Using the retail prices is easier and should entail few disputes,” said Mr Pongpanu.

The other bill sets minimum CIF prices to prevent cigarette importers from declaring prices that are too low in order to reduce their tax burdens.

The changes come after a lengthy dispute over calculation methods between Thai authorities and the US tobacco giant Philip Morris.

The Philippines, where the production base of the American tobacco company is located, filed a complaint against Thailand with the World Trade Organisation (WTO), accusing the country of violating the 1994 General Agreement on Tariffs and Trade (GATT) regarding valuation methods for customs and value-added taxes on the cigarettes imported from the Philip Morris plant in the Philippines.

Thai authorities accused the company of understating the import prices. Under the World Trade Organisation (WTO), a country member must abide by the GATT value, in effect the CIF prices, declared by an importer in calculating customs tax. After the WTO ruled last November in favour of Phillip Morris, Thailand filed for an appeal.

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