Thailand plans single cigarette tax and tighter export controls

Thailand’s Excise Department is pressing ahead with plans to overhaul cigarette taxation by introducing a single tax rate in a move aimed at improving revenue collection and reducing price distortions created by the existing two-tier system.

Pornchai Thiraveja, Director-General of the Excise Department, explained that the proposed single-rate structure was intended to address distortions that have influenced both consumer behaviour and pricing decisions by businesses.

Under the current system, cigarettes priced at no more than THB72 per pack are taxed at 25%, while those priced above THB72 are subject to a 42% rate.

The two-tier structure has encouraged businesses to keep cigarette prices at or below the THB72 threshold to qualify for the lower rate. As a result, more than 95% of cigarettes on the market are concentrated in this price bracket.

The department considers a single-rate structure more appropriate for improving the efficiency of tax collection while creating a more level playing field for businesses operating in the market.

The proposal has completed the public consultation process and is now undergoing a review of relevant academic studies and research before being submitted to the Finance Ministry for consideration. The direction of the policy is expected to become clearer by October 2026.

Export tax proposal targets smuggling loophole

In a separate measure, the Excise Department is proposing to collect tax on cigarettes intended for export, replacing the previous exemption with a “pay first, refund later” system.

The change is designed to prevent cigarettes designated for export from being diverted back into the domestic market without tax being paid, while also improving the effectiveness of state revenue collection.

Pornchai cited Sangkhlaburi district as an example of the risks involved. The area is an important border trading zone, but its natural border stretches for more than 100 kilometres, creating opportunities for tax-exempt cigarettes intended for export to be smuggled back into Thailand for domestic sale.

Under the proposed system, excise tax would have to be paid upfront. Exporters would then be able to apply for a refund after presenting evidence from the Customs Department confirming that the goods had actually been exported.

The department expects the requirement to increase the opportunity cost for illicit traders because upfront tax payments would tie up liquidity that could otherwise be used to acquire goods for illegal resale.

Combined with stricter checks during the tax-refund process, the system is intended to increase the financial risk of diverting export cigarettes back into the domestic market and make the practice less commercially worthwhile.

The proposal is currently undergoing a 30-day public consultation. The department will then spend another 30 days revising the rules in response to feedback, with the measure expected to take effect by the end of 2026.

Data-led enforcement targets high-risk areas

The Excise Department is also seeking to strengthen enforcement through greater use of intelligence and data, tracking illicit products from border areas through storage and distribution points to retail outlets.

The approach marks a shift away from applying the same enforcement methods in every case towards tailored enforcement designed around the particular circumstances of each location and target group.

Pornchai pointed to the use of private-sector empty cigarette pack surveys as one example of data integration. A survey in Samut Sakhon, within the jurisdiction of Regional Excise Office 7, found that the proportion of illicit products was nearly 70%.

The information was subsequently used for reverse traceability investigations, beginning with retail outlets and tracing supply routes back to distribution centres in strategic locations such as Ayutthaya and Ratchaburi before identifying the sources of smuggling along the border.

During the first 11 months of fiscal 2026, the Excise Department recorded 35,739 enforcement cases, an increase of 5.84% from the same period a year earlier.

Estimated fines from the cases totalled THB6.27 billion, up 14.98%. Tobacco accounted for the largest number of offences detected, with enforcement cases in this category rising by 32.68%.

“Our goal is not to make sure there are more cases next year than this year. It is to stop illegal products from entering the market, raise the cost for those trying to exploit loopholes to evade tax, make such activity harder and make offenders easier for us to detect,” Pornchai concluded.

“At the same time, businesses that operate legally should be able to conduct their business and export more easily.”