The overall progress of tobacco tax policy implementation:
- Relationship between tobacco taxes, price and public health
Tobacco tax as percentage of retail prices in Thailand is 78.60%, considered to be the highest tobacco burden in the region. Thailand has no regular adjustment process or procedure to periodic revaluate of tobacco tax. However, in practice, tobacco tax rates increased almost every 2 year. In 2012, Thailand adjusted its ad valorem tax rates for all types of tobacco and imposed a specific tax rate on cigarettes to prevent a downtrading effect. Later in 2017, the tiered ad valorem rates have been introduced together with the specific tax rates. The tax rates have been enforced until present. (Table 1)
Table 1: Comparison between the tobacco tax rate before and after 2017
|Items||Previous Tax System||Current Tax System|
|Ceiling Rate||Effective Rate (Whichever is higher)||Ceiling Rate||Effective Rate|
|Ad Valorem (%)||Specific (Unit)||Ad Valorem (Ex-factory Price)||Specific (Unit)||Ad Valorem (%)||Specific (Unit)||Ad Valorem (Suggested Retail Price)||Specific (Unit)|
|1 Shredded Tobacco||90||3 THB/gram||10||0.01 THB/gram||90||5 THB/gram||10||0.1 THB/gram|
|(2.1) Cigarettes||90||3 THB/gram||90||1.1 THB/gram||90||5 THB/gram||*SRP ≤ 72 THB 25||1.25 THB/stick|
|*SRP > 72 THB 42||1.25 THB/stick|
|(2.2) Cigars||90||3 THB/gram||20||1 THB/gram||90||5 THB/gram||10||1.25 THB/stick|
|(2.3) Other Rolled Tobacco||90||3 THB/gram||10||0.01 THB/gram||90||5 THB/gram||0||0.5 THB/stick|
|(2.4) Blended Shredded Tobacco||90||3 THB/gram||20||1 THB/gram||90||5 THB/gram||10||1.25 THB/stick|
|(2.5) Chewing Tobacco||90||3 THB/gram||10||0.1 THB/gram||90||5 THB/gram||0||0.1 THB/stick|
*These rates have been applied from 16 September 2017 to present.
**single rate of 40% of SRP and THB 1.2/stick was scheduled to be applied from 1 October 2019 onwards; however, because of tobacco industry opposition, enforcement was postponed indefinitely.
In addition, 7% Value added tax (VAT), THB 0.093/stick for Local tax, 2% of excise tax for Thai Health Promotion Foundation tax, 1.5% of excise for Thai Public Broadcasting Service (ThaiPBS) and 2% of excise for Senior citizen fund are imposed on tobacco products. Tobacco tax policy together with other tobacco control measures have resulted in the decline of smoking prevalence rates over the time.
- Level of tax rates to apply
Tobacco tax policy has been the focus of Ministry of Finance (MOF) and Ministry of Public Health (MOPH). Both Ministry of Finance and Ministry of Public Health assess tax increase mainly on revenue and public health aspects. Nonetheless, the current tobacco tax rates applied since 2017 have created high volume of low price cigarette brands in the market in which resulting in more cigarette affordability among the consumers. Although the smoking prevalence rates are decreasing over time, there is still more room to hike tobacco tax in order to have an impact on cigarette prices, particularly the government should consider removing the tier tobacco tax system and increasing tax on roll-your-own cigarettes to be able to catch up with the manufactured cigarettes.
- Comprehensiveness/similar tax burden for different tobacco products
The government does not tax all tobacco products in a comparable way. The tiered ad-valorem system has introduced a high number of cheap cigarette brands while roll-your-own (RY0) cigarettes are taxed very low and have different tax rate than manufactured cigarettes. Currently the smokers are shifting from domestic to international cigarette brands and/or to roll-your-own (RY0) cigarettes.
Thailand requires licenses for: manufacture of tobacco products except manufacturing equipment under Article 163, Excise Tax Act B.E.2560 (2017); import or export of tobacco products except manufacturing equipment under Article 166, Excise Tax Act B.E.2560 (2017); retailing of tobacco products under Article 167, Excise Tax Act B.E.2560 (2017); growing of tobacco, except for traditional small-scale growers, farmers and producers under Article 160, Excise Tax Act B.E.2560 (2017); transporting commercial quantities of tobacco products except manufacturing equipment under Article 161, Excise Tax Act B.E.2560 (2017); wholesaling except manufacturing equipment; and warehousing under Article 167, Excise Tax Act B.E.2560 (2017).
- Warehouse system/movement of excisable goods and tax payments
The government imposes excise taxes at the point of manufacture and importation under Article 21 of Excise Tax Act B.E.2560 (2017). There is no bonded warehouse system. Tax payments are not required by law to be remitted at fixed intervals or on a fixed date each month. The companies can buy stamps at the Excise department any time and they are required to report to the Excise Department regarding production and/or sales volumes by brands, price by brands, taxes due and paid, and volumes of raw material inputs. Only the government or Ministry of Finance can access the information in the industry report according to Excise Tax Act B.E.2560 (2017) Article 123; the information in the report is not disclosed to public.
- Anti-forestalling measures
As long as the products are still in the warehouse and the company has not purchased tax stamps yet, the Excise department cannot monitor or tax their products as there is no law to support such activity. However, in practice, the Excise department can monitor the stocks if necessary (but without the legal power).
- Fiscal markings
Due to Tobacco Act B.E.2560 (2017) Article 64, tax stamps are in used by different colors that affixed on different categories of the products. In addition, water mark and intaglio are also in use. Nowadays, Thailand does not use tracking and tracing mechanism and standard pack size policy, the tax stamp technology is not equipped with tracking and tracing system. In addition, Thailand does not have the national law to enforce such policy.
Thailand clearly designates and grants appropriate powers to tax enforcement authorities. Ministry of Finance is the main authority to enforce excise tax policy and registration of tobacco business for both domestic and import and export businesses. They also have power to monitor and conduct penalties on non-compliance activity. Thai Constitution specifies that all ministries and authorities have to share information among them. For instance, when tobacco companies register with Ministry of Public Health on the tobacco substances, Ministry of Public Health will later share this information with Ministry of Finance. Regarding the penalties on the non-compliance, they are appropriate, for example the penalty on illicit cigarettes that do not pay tax is as high as 10-15 times per 1 unit for fine and imprisonment according to the section 3 of Excise Tax Act B.E.2560 (2017).
- Use of revenues – financing of tobacco control
According to Thai Health Promotion Foundation Act B.E. 2544 (2001), the 2% surcharged tax per one pack of cigarette is collected from tobacco producers and importers for Thai Health Promotion Foundation. The fund is used for Tobacco Control and Health Promotion activity. Each year, Thai Health has the budget around US$ 120 million from surcharged tax from tobacco and alcohol products. This is in addition to Ministry of Public Health budget, which also has an allocation for tobacco control.
- Tax-free/Duty-free sales
Thailand does not prohibit the sale to and/or importation by international travelers, of tax-free or duty-free tobacco products. Excise tax does not impose on tobacco products sold in tax- or duty-free stores. According to Excise Tax Act B.E.2560 (2017) Article 102 and 165, travelers are allowed to carry 200 cigarettes while other types of tobacco products such as cigar, chewing tobacco, RYO, the allowed amount for travelers cannot be exceeded 500 grams.
- Protection of tax policies from vested interests
There is no written document or guidelines for government officials relating to the WHO FCTC Article 5.3. Nonetheless, only Ministry of Public Health has code of conduct on prohibiting government officials to interact with the tobacco industry.