Retail tobacco prices shoot up under new excise regime

State-owned Thailand Tobacco Monopoly (TTM) has increased its retail cigarette prices by 9-22 baht per pack after the new excise tax rates came into force on Saturday. Tobacco giant Philip Morris has absorbed the additional costs by maintaining its prices.

TTM has raised the price of most of its 20 brands, with the cheapest brand at 60 baht a pack and the most expensive at 95 baht, said a source familiar with the matter.

The state-run agency has increased the retail price of two cigarette brands previously priced at 68 baht per pack to 90 baht, increasing four cigarette brands by nine baht to 95 baht from 86 previously, and raising eight brands priced below 60 baht per pack to 60 baht, the source said.

But TTM cut the retail prices of two brands by three baht per pack to 60 baht from 63 previously, the source said.

The new excise rate takes into account both value and quantity, as opposed to previous legislation, which targeted either value or quantity, depending on which was higher. Cigarette packs priced 60 baht or lower will face a 20% tax, and those above 60 baht will see a levy of 40%. On a quantity basis, the new rate has increased the tax from 1.10 baht a cigarette to 1.20.

In two years the excise tax for cigarette packs priced 60 baht or lower will be raised to 40% — the same rate applied to packs priced above 60 baht.

The new levies are part of the new excise law, under which retail prices will replace the existing ex-factory price and cost, insurance and freight values as a base for excise tax computation. The change is aimed at creating a fairer system for manufacturers and importers after some businesses were found to have understated their taxes.

In related news, Philip Morris Thailand managing director Gerald Margolis said the retail prices of cigarette brands have been kept unchanged at 165 baht per pack for the most expensive brand and 72 baht a pack for the cheapest one.

Low-priced cigarettes have gained popularity at a rapid pace in the Thai market over the past several years because of the excise tax structure, causing a shortfall for Excise Department revenue, Mr Margolis said, adding that the tax structure also failed to prevent cigarette consumption from rising.

Cigarette brands priced below 60 baht per pack make up 55% of the market.