Thai Tobacco Trade Body Backs Single-Rate Tax Reform Move

The Thai Tobacco Trade Association urges ministers to axe two-tier levies, warning price distortions harm small shops and fuel illicit sales.

The Thai Tobacco Trade Association (TTTA) has thrown its weight behind government plans to overhaul the country's cigarette tax regime, urging ministers to replace the current two-tier system with a flat, single-rate tax to curb market distortion and safeguard public revenue.

The backing comes as the Excise Department confirms it is reviewing the structure, which is currently subject to academic consultations. Under the proposed reforms, Thailand would abandon its multi-tiered ad valorem model — a policy frame currently retained by just seven countries worldwide.

Speaking in a report published by Krungthep Turakij, Thanyasarun Saengthong, Executive Director of the TTTA, described the Excise Department’s direction as a positive signal that a chronic, long-standing issue within the industry was finally being addressed.

"The two-tier tax structure introduced in September 2017 has caused severe friction across the entire tobacco supply chain, from farmers to corner shops," Thanyasarun said. "If the government moves to a balanced, single-rate structure set at an appropriate level, it will deliver maximum benefits to all stakeholders."
 

Market Distortion and Smallholder Impact

Under Thailand’s current regime, cigarettes priced below 72 baht per pack attract a lower tax tier, whilst those priced above are taxed at a significantly higher rate.

Industry figures argue this setup incentivises manufacturers and importers to aggressively compress prices below the 72-baht threshold to minimise their tax liability.

This artificial pricing bottleneck has restricted product diversity, squeezed profit margins, and severely hit small retailers. More than 400,000 licensed stockists across the country — predominantly traditional mom-and-pop shops — have seen profit margins per pack narrow as cheap products dominate the market.

Prior to 2017, Thailand operated a single-rate structure that accommodated varied consumer purchasing power through normal market competition. Following the shift to a two-tier tax and sharp subsequent tax increases, legitimate retail sales volumes fell sharply, driving consumers towards budget brands and the illegal market.

Enforcement and Revenue Collection

Beyond structural distortions, legitimate retailers face steep competition from contraband tobacco. Unregulated illicit trade has ballooned in recent years, bypassing health regulations and eroding state tax revenues.

The TTTA stressed that tax restructuring must go hand in hand with rigorous, continuous enforcement against illicit cigarettes. Setting an appropriate single tax rate, the association noted, is essential to maintaining the delicate balance between securing state revenues, managing consumption, and preventing smokers from turning to untaxed black-market products.

Once public consultations conclude, the TTTA hopes the Ministry of Finance will swiftly push the legislation through. Transitioning to an internationally aligned, single-rate tax regime is expected to restore normal market mechanics, protect small business incomes, and establish a more reliable revenue stream for the state treasury.