The Excise Department is deliberating on the excise tax structure for cigarettes to strike a balance between public revenue, farmers' income, public health and tackling illegal cigarettes.
The present tobacco tax structure stipulates a 20% tax rate is applied to the retail price for packs costing up to 60 baht. If the retail price exceeds 60 baht per pack, a 40% tax rate is applied.
A flat tax rate of 40% was scheduled to be applied since October 2019, regardless of the retail price.
The Finance Ministry previously requested the cabinet extend the two-tier tobacco tax rate to the end of September this year. The extension has now been prolonged to September 2021.
There have also been requests from the Tobacco Authority of Thailand (TOAT), which monopolises domestic tobacco production, and tobacco farmers for the Excise Department to review the 40% flat tax rate as such a single-tier rate affects income earned by the TOAT and farmers.
The department is rushing to reach a conclusion on the excise tax structure for tobacco because the single-tier tax law has been deferred twice, said Lavaron Sangsnit, director-general of the Excise Department.
The excise tax structure on tobacco will take four main factors into account, said Mr Lavaron. They comprise revenue generation for the country, income of tobacco farmers, discouraging people from smoking and competing with illegal cigarette products.
"The government extended the delay in implementing the law in the past, but I don't want to do that. There must be a clear conclusion on the excise tax structure for cigarettes, in accordance with the aforementioned four factors," he said.
"The tax rate must also be set appropriately, neither too high nor too low. Otherwise there will be an increase in smuggled cigarettes and the Excise Department will waste time arresting [offenders]."
The department is studying whether to tax cigarettes using a single-tier system or maintain the existing two-tier scheme, said Mr Lavaron.
Both domestic and foreign cigarette producers want clarity on the excise tax structure to plan their sales price strategy.
If the excise tax rate causes cigarette packs to become 3-5 baht more expensive, this would have a profound impact on the entire cigarette market, he said.
Regarding the management of illegal cigarettes, the Excise Department will use e-stamp technology to verify the source of production and tax payment, a process that is in line with the World Health Organization's Framework Convention on Tobacco Control, said Mr Lavaron.