Excise Dept to ask Cabinet to approve single excise rate on cigarettes

Proposal to Replace Double-Tier System

The Excise Department will ask the Cabinet next month to approve a single excise rate for cigarettes, replacing the current double-tier system.

Aim to Address Smuggling and Fairer Taxation

Pornchai Thiraveja, Director-General of the Excise Department, said the proposal for a single excise rate would be submitted to the Cabinet for deliberation and approval before the House dissolution on January 31.

Pornchai explained that the single rate system aims to address issues such as smuggled cigarettes and e-cigarettes, and it would create a fairer mechanism for taxing cigarettes while increasing efficiency in revenue collection.

Current Double-Tier System and Its Issues

Currently, the Excise Department applies two excise rates on cigarettes based on their retail prices. If a standard cigarette pack sells for 72 baht or less, a 25% excise rate is applied. For packs that sell for more than 72 baht, a 42% rate is imposed.

Pornchai noted that the double-tier system prompts manufacturers to use the lower-tier rate, resulting in cigarette prices being frozen between 70 and 72 baht, thus stifling fair price competition. The current system has also led to smuggling of both cigarettes and e-cigarettes into the market.

Ministerial Directive for Quick Implementation

Pornchai stated that the new excise rate could be enforced through a ministerial directive, meaning it would not need to be approved by Parliament. If the Cabinet approves the proposal, the draft directive will be sent to the Office of the Council of State for scrutiny, and it could be enforced immediately.

Stakeholder Consultation and Industry Impact

The Excise Department will consult with other relevant government agencies to decide if there should be a waiting period before the new single rate system is implemented.

Pornchai reassured that the new system would not significantly impact the market, as the tobacco industry has already been adjusting. The sales of higher-tier priced cigarettes have been declining, and the Excise Department mostly collects excise on lower-tier priced cigarettes.

Crackdown on Smuggled Cigarettes

Pornchai also emphasized that the department would increase efforts to combat smuggling. In the past two months, there have been 4,000 cases of contraband cigarettes seized, totaling 700,000 packs.

He added that the smuggled cigarettes had caused the government to lose approximately 40 million baht in taxes but had resulted in 500 million baht in fines.

Pornchai concluded that while the single excise rate would help, it would not be enough on its own, and continued crackdowns on smuggled and e-cigarettes would be necessary.