Thailand's Cigarette Tax Scandal Blown Out Of Proportion

[webfact]

EDITORIAL

Cigarette tax scandal blown out of proportion

By The Nation

In the censure debate, the opposition will try to hammer the govt on an old tax controversy, but is this really Thailand's most pressing problem?

When the opposition Pheu Thai Party takes the government to task for its mishandling of the Bt68-billion cigarette tax issue this week, the public will likely hear charges of the government's tweaking of the legal process to end disputes with US tobacco giant Philip Morris. The no-confidence debate starts today and runs until Friday.

The cigarette tax story started in 2006 when Thailand's Department of Special Investigation (DSI) was told to examine an allegation that Philip Morris had under-declared the value of its products imported into Thailand. According to King Power, the Thai duty-free retail operator, the price of its Philip Morris cigarettes was about Bt27 per pack, but another importer, a unit of Philip Morris, declared similar products at a price of only about Bt7 per pack. In other words, there was a value discrepancy of around Bt20 per pack, prompting the Thai authorities to accuse the US firm of massively under-declaring the value of its products to evade taxes.

But there was an explanation that the price of around Bt27 per pack was based on supplies from Malaysia, while the latter price of about Bt7 was based on supplies from the Philippines. One was a retail price and the other was wholesale. Yet, Thai authorities came up with the figure of Bt68 billion by multiplying Bt20 by the number of cigarette packs imported into the country by Philip Morris at the time.

While the case was still pending, Philip Morris placed a guarantee of around Bt2 billion with Thai customs authorities in order to get its products released from warehouses for domestic sale. This sum has already been returned to Philip Morris, according to a Thai official.

However, the case is still not closed and might be further complicated by this week's censure debate. On the one hand, the DSI earlier attempted to charge the US firm with falsely stating the value of its imports, thus causing damage to Thailand. On the other, Thailand recently lost a case against the Philippines at the World Trade Organisation regarding the valuation of cigarette imports for tax purposes. Thailand is meanwhile lodging an appeal with the WTO.

In the Thai taxation court, Philip Morris also filed a lawsuit against the Thai Excise Department, which is responsible for collecting excise taxes on cigarettes and other special products. The court acquitted the Excise Department, but Philip Morris has since lodged an appeal, which is pending.

The DSI has not decided whether it will pursue further legal action against Philip Morris by itself, after public prosecutors in January this year said they had dropped the charges against the US tobacco firm.

Given this, the opposition has accused Prime Minister Abhisit Vejjajiva and Kiat Sithi-amorn, the president of the Office of Thai Trade Representatives, of interfering with the legal process via public prosecutors to aid the US firm.

Besides the alleged government interference issue, the opposition will also have to convince the public during the censure debate in Parliament that the Bt68-billion in damages allegedly caused by import undervaluation is really the big issue. At face value it may look like the government has lost a huge amount in tax revenue, but the tax calculation method may still be open to question.

More importantly, the credibility of both Prime Minister Abhisit and chief Thai trade representative Kiat - who allegedly has played a leading behind-the-scenes role in ending some of the disputes between Thailand and the US tobacco giant in return for some unspecified favours - is at stake.

In addition, Philip Morris has threatened to file counter-suits against Thai authorities for causing damage to its reputation.

As far as the pricing of cigarettes is concerned (Bt7 per pack at wholesale prices), the country's anti-smoking lobby should also take a close look at this issue.

-- The Nation 2011-03-15

[pogal]

Of course its blown out of proportion. Corruption in Thailand is just part of life now. If we made a big deal about corruption for everything that is corrupt, the country would cease to operate. Corruption is an integral part of everything that is Thai. So much so that it is not even considered corruption anymore. Corruption only actually manifests itself as corruption when the government or powerful are loosing money by it (or its foreigners doing it), otherwise it doesn't exist or is openly accepted.

Obviously in this case a foreign company is doing something that all Thai companies do anyway and so they are fair game and will reap the wrath of Thai government.

Just another day in paradise:)

[KarstenBoAndersen]

Cigarettes cost 27 Baht per pack when bought from Philip Morris in The philipines in whole container loads.

I had never seen prices as low as 7 Baht, that most be copy cigarettes from China !

I had seen many prices on wholesale P.M. cigarettes and they are all in the ragne 24-30 Baht per pack.

So 7 Baht is not the price, but P.M. can of course sell to any price they like between their own companies so they evade tax.

[exbelg]

lets love thailand and stop imports of these cancer sticks, if someone has to die from a sigarette in thailand, it better be made in thailand

just kidding

why not a crackdown on sigarettes and sigarette vendors ? they are selling DEATH and cancer sticks, it should be illegal

[Bobr]

No, it's not blown out of proportion. Phillip Morris is an American company and the height of corporate evil. The case put together by the DSI was a lot of painstaking work, yet it was shoved aside by the current Government far too quickly. The relationship between the American Government, which only exists for the benefit of corporate greed, and the current Thai Government is far too close, and definitely not for the benefit of the average Thai. There is little doubt that political pressure is behind the dropping of this case, if not flat out corruption.

This whole thing stinks

[Bakseedaa]

No, it's not blown out of proportion. Phillip Morris is an American company and the height of corporate evil. The case put together by the DSI was a lot of painstaking work, yet it was shoved aside by the current Government far too quickly. The relationship between the American Government, which only exists for the benefit of corporate greed, and the current Thai Government is far too close, and definitely not for the benefit of the average Thai. There is little doubt that political pressure is behind the dropping of this case, if not flat out corruption.

This whole thing stinks

We have to remember that the taxman still collected his taxes on the profits of the ciggarettes and the tax on the buyer of each single pack, because the profit on each pack was Big, the tax was also big, so don`t worry about the tax man, he got his moneys .... as usual..!! The smokers paid... Smokescreen again by the opposition partys...

[IanPrince99]

Like Exxon, GE, Boeing, P&G, etc. Phillip Morris is a good American corporate. They will not do corruption.

[bkk_mike]

Like Exxon, GE, Boeing, P&G, etc. Phillip Morris is a good American corporate. They will not do corruption.

I think it's more a case of them being wary of being prosecuted back home. Although the law in the US is specifically in relation to giving money to government officials.

Remember the Bangkok Film Festival couple who were found guilty of bribing the TAT governor and who got jail time for it. The proof was enough to jail them in the US where a lawyer only has to prove reasonable doubt. Yet the person receiving the bribe in Thailand is still uncharged.

[Bobr]

Like Exxon, GE, Boeing, P&G, etc. Phillip Morris is a good American corporate. They will not do corruption.

Sarcasm I hope? GE built the nuclear reactors that are poisoning northern Japan.