Huge Tax Hikes On Liquor And Cigarettes

[Jai Dee]

Huge tax hikes on liquor and cigarettes

The Cabinet yesterday approved a drastic hike in liquor and tobacco taxes, citing a new government policy to reduce consumption and a much-needed reduction in treatment costs for those affected by drinking and smoking. Published on

The tax hike on liquor, starting today, only effects local brands while the increase in tobacco tax covers both local and imported brands.

Prices for the locally-distilled "white liquor", with an alcohol content of 28 to 40 per cent, will be increased by Bt9 to Bt12 per 0.625-litre bottle or around Bt110 per litre - up from Bt70.

The rates for blended liquors, with an alcohol content of 38 to 40 per cent, will be increased by Bt9-Bt12 per 0.625-litre bottle.

The rates for brandies and other premium brands will increase by up to Bt90 per 0.640-litre bottle.

Local cigarettes will cost an extra Bt2 per pack, while imported brands will cost an extra Bt3.

The Cabinet said it expected the tax hike would result in a reduction of 60-65 million litres of local alcohol being drunk each year and a 20 million pack decrease in cigarette use.

Reactions from the liquor industry to the tax hike were mixed. Chatchai Viratyosin, marketing manager of Singha Corporation, said: "The tax increase for white liquor is too low for what it should be, when compared to other kinds of alcoholic drinks."

He said the tax level should correspond to the degree of alcohol content. "The government should have raised the white liquor tax to Bt240 per litre, to ensure fair competition among the wider alcoholic products.

"But nevertheless, it is a good sign, since the white liquor tax hasn't been increased for at least 20 years. I can still see some sort of state protection. But public pressure is mounting."

Viroj Chantaramolee, senior vice president of Thai Beverage Marketing, said the company's senior management would meet today to discuss the implications.

Zanita Kajiji, marketing manager of Diageo Moet Hennessy (Thailand), expected the company's products and market share to be affected.

Source: The Nation - 29 August 2007

[cdnvic]

If the past is any indicator, those who were fine with the coup, rampant corruption in public contracts, the southern insurrection, etc, will now join in loud protest

[Jai Dee]

Taxes on spirits and cigarettes rise today

Cabinet yesterday approved higher excise taxes on spirits and tobacco from today. Spirits go up by 9-12 baht a bottle and cigarettes by 1-3 baht a pack.

Deputy government spokesman Chodchai Suwanaporn said the cabinet agreed with the Finance Ministry the increase was in order to make competition fairer among the producers of liquor, special liquor, wine and beer. ''Spirits with a higher alcohol content should face higher taxes,'' he said.

Excise Department director-general Wisudhi Srisuphan said sin tax revenue was expected to increase by six billion baht per year.

More from the Bangkok Post here.

[Gravelrash]

Governments in every country love to tax alcohol and cigarettes. It is a win-win for them as firstly it increases revenue and secondly they claim they are doing so to reduce consumption and hence benefit the community.

[taxexile]

claim they are doing so to reduce consumption and hence benefit the community.

fewer smokers = fewer deaths , disabilities and family bereavements from lung and heart disease.

lower alcohol consumption = fewer road deaths and fewer alcohol related crimes (such as rape , crimes of violence and spousal abuse.)

community benefits dont come much better than that.

[womble]

claim they are doing so to reduce consumption and hence benefit the community.

fewer smokers = fewer deaths , disabilities and family bereavements from lung and heart disease.

lower alcohol consumption = fewer road deaths and fewer alcohol related crimes (such as rape , crimes of violence and spousal abuse.)

community benefits dont come much better than that.

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Governments the world over love to claim they are trying to help us, but economic theory proves they are bullshitting us..............

If we all stopped drinking and smoking they'd be in a right mess when it comes to tax collection.

[dr_Pat_Pong]

claim they are doing so to reduce consumption and hence benefit the community.

fewer smokers = fewer deaths , disabilities and family bereavements from lung and heart disease.

lower alcohol consumption = fewer road deaths and fewer alcohol related crimes (such as rape , crimes of violence and spousal abuse.)

community benefits dont come much better than that.

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Governments the world over love to claim they are trying to help us, but economic theory proves they are bullshitting us..............

If we all stopped drinking and smoking they'd be in a right mess when it comes to tax collection.

Agreed

[taxexile]

If we all stopped drinking and smoking they'd be in a right mess when it comes to tax collection.

they would just find something else to tax.

governments are good at that , if nothing else.

[Briggsy]

9 Baht to 12 Baht. This is arguably not a huge hike.

For me this is too little, particularly on hard drink. However if they increase it too dramatically, the moonshine industry will boom overnight.

[madmitch]

THe headline is a bit over the top.

These are hardly HUGE increases.

Can't see 2 baht a pack stopping too many smokers. Never mind, if it is too much they can always revert to the local rolling todacco, still available at 5 baht or so for a pack and still proudly displayed on the shop counter at my local store.

[TexasRanger]

2 baht a pack, what a joke.

[cmiuc]

fewer smokers = fewer deaths , disabilities and family bereavements from lung and heart disease.

lower alcohol consumption = fewer road deaths and fewer alcohol related crimes (such as rape , crimes of violence and spousal abuse.)

community benefits dont come much better than that.

This will not reduce anything... What it will do is reduce the income of the Thai family... that's who it will affect. did you ever know anyone to give up drinking and smoking because of tax increases? if anything it will only increase... and yes, its the government scrounging around to get more money to pay it's ever increasing bills as nothing is progressing or changing in this country at present.

[PaulHamon]

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Don't agree here.... ATALL. Smoking in Australia has gone to very small percentage of the population spearheaded with massive pricing increase... it is the major factor affecting the take-up of the habbit.

[Mid]

9 Baht to 12 Baht. This is arguably not a huge hike.

For me this is too little, particularly on hard drink. However if they increase it too dramatically, the moonshine industry will boom overnight.

33% is not HUGE ??

who would have thought ??

then again it's only 2% of the upcountry minnimum daily wage

nope not huge at all ..............

[backflip]

"Cigarettes have inelastic demand curves, price changes have little effect on demand."

That is simply untrue. How do you account from the huge drop in smoking in the US, education? Baloney! As with most other commodities, higher prices lead to lower demand. I'm not sure that a 3THB increase is sufficient. Regardless, congratulations to the Thai government for getting this one right.

[steveromagnino]

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Governments the world over love to claim they are trying to help us, but economic theory proves they are bullshitting us..............

If we all stopped drinking and smoking they'd be in a right mess when it comes to tax collection.

Actually, I suspect more detailed analysis will show that advertising and price both have a statistically significant impact on demand; certainly research in NZ at University of Auckland in econometrics proved that for cigarettes and a similar study for beer (as far as I can recall). So the tobacco industry came out with their own study that showed you can do anything you want for advertising and pricing; demand never changes; hence all pricing and advertising is merely for brand switching.

This being the case, why not raise the tax 100% then? Strangely, the tobacco and beer industries were not supportive of that idea; strange when they had just started price plays little role on consumption.

Here? Demand would be elastic for sure. Especially white liquor. Many farmers would switch to beedle nut or whatever that stuff is called in english mahk Thai.

[jts-khorat]

9 Baht to 12 Baht. This is arguably not a huge hike.

Maybe you did not read the article, increasing tax by up to 30% seems steep -- we just had such a hike recently -- and that comes in the end to THB 40-90 per bottle.

The tax on white spirit has been doubled to 25% of the ex-factory price, and the calculation based on alcohol content upped to 1.10 baht for each 1% of alcohol per litre, up from 70 satang.

Tax for blended spirit, such as Mae Khong and Sangsom brands, remains at 50% of the value, while the calculation of tax based on 100% alcohol content has been raised to 280 baht a litre from 240 baht a litre.

Tax for special liquor, such as brandy, has been increased to 45% from 40%, and will now be 400 baht per litre.

And what makes me rather more angry is the overnight politics (nobody can argue with the health benefits :-)

In a normal political scenario you get a tax increase within a certain timeframe instead "from today", but we ARE a banana republic here...

[andyc2006]

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Governments the world over love to claim they are trying to help us, but economic theory proves they are bullshitting us..............

If we all stopped drinking and smoking they'd be in a right mess when it comes to tax collection.

I'm not saying that I agree with the high taxes, or even that I disagree with the gist of your post, however, on the claim of inelastic demand curves for cigarettes, that's proving to be false, at least with the most recent studies in the USA and Canada. It appears that you just have to hike the taxes REALLY high before it has an impact.

[cclub75]

I love to see the brigade of healthy people starting to comment...

Come on guys, let's use our brain.

-the government has been nominated last october. Why to wait until august (10 month later) to take such a decision, if public health was the real motivation ?

-the gvt has only 4 month left. Why not leave such a decision to the next -elected- government ?

-why this decision was not announced… before the referendum for instance ?

… The answer is obvious : shortage of money.

Indeed, increases are huge. +58 % for white alcohol (from 70 to 110 THB per liter) for instance.

Excise taxes have a great advantage : their effect is immediate.

And you should remember that excise taxes count for 22.5 % of total gvt's revenues (see datas here)...

No one is dupe, not even the people at Boonrawd Brewery, producer of Singha beer : "The taxes are aimed at increasing government revenue, rather than reducing consumption".

But mai pen rai : the general elections are going to solve all the problems. Be confident. And sleep well.

[Robbie Dye]

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Don't agree here.... ATALL. Smoking in Australia has gone to very small percentage of the population spearheaded with massive pricing increase... it is the major factor affecting the take-up of the habbit.

Agree totally that higher prices cut the take up but it will be whole generation more before those who have never started get to the age where they top of the tree with nobody younger smoking at all, it will happen, but the current older generation like me will NOT be put off by price rises ! We all know we are bad boys but we started at an age where smoking was encouraged!

[Mid]

hike the taxes REALLY high before it has an impact.

gee , wonder what the def of an inelastic demand curve is ??

[pascharay]

The USA taxed cigarettes and has yet to construct a single hospital or treatment center for cigarette smokers.

Instead they pay for TV ads saying cigarettes are bad for you

This is another hike in revenue piracy for the government.

More importantly what happens to beer?

Leo Beer went up 4 baht at 7/11

Edited August 29, 2007 by pascharay

[Rotweiler]

What a joke! So-called "Sin taxes" are a cash cow and are milked in almost every country in the world.... Interesting to see that the GOVERNMENT OF THAILAND has recognized that and has decided to take advantage to the the endless milk. As most other countries have discovered, this really is an endless supply of cash since increasing taxes has no real effect on smoking or drinking rates - but it [bDOES][/b] have an effect on the disposable income of families!

"fewer smokers = fewer deaths , disabilities and family bereavements from lung and heart disease.

lower alcohol consumption = fewer road deaths and fewer alcohol related crimes (such as rape , crimes of violence and spousal abuse."

Edited August 29, 2007 by Rotweiler

[reddove]

9 Baht to 12 Baht. This is arguably not a huge hike.

For me this is too little, particularly on hard drink. However if they increase it too dramatically, the moonshine industry will boom overnight.

33% is not HUGE ??

who would have thought ??

then again it's only 2% of the upcountry minnimum daily wage

nope not huge at all ..............

Ah, another bright and inspired by some high form of “intelligence” move by this government. Don't they even look at history of those who smoke Cigarettes cigs or drink alcohol of any kind and then decide to raise a tax on it.

IT DOES NOT WORK, AND NEVER WILL!!!.

People, both Thai and foreigners will just pay for the extra cost of enjoying one of these pleasures in life.

The U.S. raised the taxes on Cigarettes and the Courts have issued huge settlements on the Tabbaco Industry and the results of this, the costs went up. People still go down and buy their smokes and smoke.

Alcohol the same.

Why not tax, lets see, Condom purchases and usage, viraga, and …

[TAWP]

ajc1970>> Actually, those surveys are false too. Take Sweden as an example. The country of high taxes. When the government finally took the taxes too high the 'not so legal citicens of former Yugoslavia' find out that you could import (smuggle) in cigaretts in large quantities and sell for half price - and still make a killing in price.

This is how the 'yugo-mafia' got established in Sweden 10 years ago.

Did I mention we have had a mafia-war running for years now?

People still keeped smoking, just not the legal (taxed) ones. The ones I know that have stopped, did it since they grew up and found out that the idea of being around for long (with their kids) was more important that their own satisfaction and relaxation.

Edited August 29, 2007 by TAWP

[sexy man]

The USA taxed cigarettes and has yet to construct a single hospital or treatment center for cigarette smokers.

Instead they pay for TV ads saying cigarettes are bad for you

This is another hike in revenue piracy for the government.

More importantly what happens to beer?

Leo Beer went up 4 baht at 7/11

what happens to the price of beer it doesn't seem to be mentioned, so why price hike at 7/11

[Woodcaulk]

fewer smokers = fewer deaths , disabilities and family bereavements from lung and heart disease.

lower alcohol consumption = fewer road deaths and fewer alcohol related crimes (such as rape , crimes of violence and spousal abuse.)

community benefits dont come much better than that.

this slight rise in tax will result in absolutely no decrease in consumption

[jts-khorat]

But mai pen rai : the general elections are going to solve all the problems. Be confident. And sleep well.

Nice one. And good to see that Thailand is the only country where soldiers and not doctors are the experts in human health. How could the rest of the world get it so wrong...??

[mikethevigoman]

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Don't agree here.... ATALL. Smoking in Australia has gone to very small percentage of the population spearheaded with massive pricing increase... it is the major factor affecting the take-up of the habbit.

$11 a pack in the uk and the unemployed are still puffing there way into hospital !

[raswartz]

Cigarettes have inelastic demand curves, price changes have little effect on demand.

Governments the world over love to claim they are trying to help us, but economic theory proves they are bullshitting us..............

If we all stopped drinking and smoking they'd be in a right mess when it comes to tax collection.

Not so-- tobacco is an elastic good. The World Bank report (http://www1.worldbank.org/tobacco/book/html/chapter4.htm) on tobacco control measures also shows that tobacco is more elastic in middle- and low-income countries than it is in high-income countries.

For example, the elasticity coefficient for the US is approx. -0.4, indicating that a 10% increase in price leads to a 4% decrease in consumption. But in China, the elasticity coefficient is approx -0.8, indicating that a 10% increase in price leads to an 8% decrease in consumption.

If we asssume that Thailand is somewere between the US and China, then we can assume that a 10% increase in price leads to a 6% decrease in demand.

However, I would disagree that a 2 baht increase is a "huge" increase. If a pack of cigarettes costs 40 baht, this is only a 5% increase. Therefore it's reasonable to expect about a 3% decrease in demand for tobacco. That may be small change, but it is probably unwise to make a radical change, which could lead to more black-market activity.

Since nicotine is addictive, the decrease does not occur immediately, but cumulates over time. The longer the price increase is in effect, the greater the decrease in demand. And the longer you have been addicted to nicotine, the more slowly you change your habits, but conversely, the more recently you took up smoking, the more quickly you will drop it. This probably accounts for the difference in elasticiy between the US and China, where smoking is more or less entrenched respectively.

The effect on the govt's revenue is both positive and negative, as they take more taxes on fewer cigarettes, and the total revenue is the product of the tax rate and the sales volume.

Finally, I would rather see a tax hike on tobacco, which punishes only the smokers, than censorship of tv and movies, which punishes everyone, but most especially the artists whose work is defaced by the goverment.