WHO wants changes to tobacco tax policies, 22 April 2011

The government should increase the tax rate on rollyourown tobacco product to reduce the number of smokers who turn to cheaper products because of high taxes on manufactured cigarettes, experts suggested.

 In the short term, the government should increase taxes for all tobacco products, Ayda Yurekli, a tax economist at the World Health Organisation, said yesterday at a seminar cohosted by the Excise Department of the Finance Ministry.

She said an increase of current excise tax from Bt0.001 per gram to Bt0.01 per gram could lead to a tenfold increase in tax revenue. It would also increase retail prices by 4 per cent and decrease demand by 1.7 per cent.

According to Excise Department estimates, 53.9 per cent of Thai smokers consume rollyourown products while 43.9 per cent smoke manufactured cigarettes.

Yurekli also recommended that the govฌernment collect tax on both volume and value of tobacco products to prevent producers seeking legal loopholes.

She also urged the government to set a floor price for cigarettes. She said producers often cut the retail price of cigarettes after governments raise tax rates.

The Cabinet recently agreed with the Finance Ministry’s proposal to base tobacฌco taxes on retail prices but the government has yet to submit the amendment to Parliament.

Currently, the Excise Department bases taxes on the producer price for locally made products and CIF (cost, insurance and freight) prices for imported products. This practice encourages importers to undervalue the CIF price to pay less tax. Importers of highpriced cigarettes have been accused of false CIF declarations.

Deputy Finance Minister Man Pathanothai said the government might set a floor price of Bt22 per pack of cigarettes. Producers of cheap cigarettes in China and Indonesia have taken advantage of freetrade agreements by exporting more cheap products to Thailand.

Pongpanu Svetarunda, directorgeneral of the Excise Department, said it would proฌpose new tax rates to the next government after the coming election.

“Under tobaccotax restructuring, the department would not aim to collect more taxes but we want to correct tax distortion,” he said.

The high tax rate on cigarettes at 85 per cent of the retail price (official rate) or its effective rate of 567 per cent (actual tax rate collected from producers) has affected conฌsumer behaviour. Many smokers have shiftฌed to cheap cigarettes and rollyourown products, he said. Illicit tobacco trade has also increased.

He expects that tax on retail prices and a minimum tax rate set on cigarettes would mitigate such issues.

Representatives from the Ministry of Public Health said tax measures were the most effective way to reduce smoking, followed by antismoking campaigns.

Man said he did not know whether new tax rates would decrease the number of smokers.

“We have to wait and see whether consumption of cigarettes, currently about 1.4 billion packs a year, will drop,” he said.

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