The overhaul in the excises, implemented in September, had put Thailand Tobacco at disadvantage, as its tax burden had risen disproportionately to that of the foreign producers, Daonoi Suttiniphapunt, Tobacco Monopoly’s managing director, told a press conference yesterday.
She said the company had to increase its product prices while the big importers had even lowered their prices on some lines.
She urged the Finance Ministry, which oversees the Excise Development, to review its law enforcement in the sector.
“The problem concerns two areas – the loophole in related regulations issued by Finance Ministry and the biased law enforcement under the Excise Development,” she said.
The new taxing structure is based on the suggested retail price of a product, instead of the ex- factory or CIF prices for the local producer and the foreign brands, respectively, that applied previously.
The rate is 20 per cent for a cigarette pack worth no more than Bt60 and 40 per cent for higher priced packs. They also have to pay Bt 1.20 per each cigarette stick.
The Excise Department earlier sought to reassure the industry that the new tax system would be fairer for everyone. Moreover, if any company sold cigarettes at cheaper prices to the previous level, without good reason, they would be subject to scrutiny. The department could force them to accept the suggested retail prices, which would result in higher tax payments.
Daonoi complained that while TTM had followed the rules strictly, some of the biggest brands had failed to do so. They had taken advantage of the loopholes in the system and the lack of law enforcement to ramp up the presence of their products in the Thai market, she said.
Within a month of the new taxing structure going into force in September, the market share of the Thailand Tobacco had dropped sharply from 80 per cent to 65.9 per cent, she said. The share held by the foreign brands rose to 32.5 per cent, at the expense of Thailand Tobacco, she said.
Daonoi warned that TTM had started to lose money and it could lead to transfers to government coffers drying up next year. The government may lose revenue of Bt 8 billion for that year, she said.
The company contributed Bt8.8 billion to the government this year. It also paid Bt68.6 billion in excises.
The projected reduction in contributions would have a knock-on effect in diminished support for causes such as the Thai Health Promotion Foundation, Thai PBS television and a fund for the elderly, Daonoi warned.
Looking ahead, the future of the company is bleak as the tax rate will go up to 40 per cent in the next two years.
“To introduce new products to the market is not easy due to the strict laws and consumers may not welcome them, so the TTM would find it very hard to play the pricing game,” Daonoi said.
“If the Finance Ministry and Excise Department do not thing, the company will go bankrupt,” she added.
TTM is a state enterprise under the Finance Ministry’s supervision.