Tax Jump Causes Cigarette Sales Slump: Thailand

[webfact]

Tax jump causes cigarette sales slump

BANGKOK, Oct 8 – Thailand Tobacco Monopoly (TTM) managers and workers are getting the jitters after a recent increase in excise tax slashed sales of locally-produced cigarettes by half.

TTM director Torsak Chotemongkol said he plans to discuss the new tax structure with the Excise Tax Department next week, but he claims that the new tax collection procedure will not deter smokers as originally desired.

Raising the tobacco tax from Bt1 to Bt10 per kilo is a 10-fold hike, he said, adding that the new tax structure requires TTM to pay Bt1,000 for a kilo of blended tobacco.

The increasing prices of cigarettes have deterred smokers from buying cigarette packets and they turned to roll cigarettes by themselves, he said.

Mr Torsak said the sales of raw tobacco have increased nearly seven times since 1993, indicating that there was no quality control of raw tobacco which is more dangerous to health.

After meeting with the Excise Tax Department, the TTM director will hold talks with the Public Health Ministry which spearheaded the new tax structure.

He said he will explain to the health ministry that the new measures sharply increased the prices of cigarettes but did not reduce consumption as intended by the ministry.

Mr Torsak said the sales drop will affect the monopoly’s financial contribution to the state, recorded at more than Bt50 billion last year.

Last month, Deputy Finance Minister Thanusak Lek-uthai--who opposed the higher taxation--said Thailand and Australia were the two countries which most stringently controlled cigarette distribution.

He claimed that cigarettes from neighbouring countries--particularly China--will easily flow into Thailand when the ASEAN Economic Community takes effect in 2015. (MCOT online news)

-- TNA 2012-10-09

[coma]

Finally some good news to report. I sure have noticed that there are a lot less smokers around these days when compared to say 5 years ago.

[Thai at Heart]

Raising the tobacco tax from Bt1 to Bt10 per kilo is a 10-fold hike, he said, adding that the new tax structure requires TTM to pay Bt1,000 for a kilo of blended tobacco.

They buy 90 percent of their tobacco locally? Does this apply to imported tobacco? This explanation makes no sense at all.

[whybother]

Mr Torsak said the sales of raw tobacco have increased nearly seven times since 1993, indicating that there was no quality control of raw tobacco which is more dangerous to health.

What has the increase in sales of blended tobacco been in the last 20 years?

[jerrysteve]

GOOD!!!!! They should double it then!

[GeorgeO]

I would wager that there actually has been no reduction in the consumption of cigarettes, but instead, a considerable hike in the number of cigarettes being illegally imported across the borders.

I used to visit Cambodia regularly, and I was amazed at how cheap cigarettes, wine, beer, etc., were at the border checkpoints. No doubt some local entrepreneur is currently taking advantage of this to flood the Thai market and make a killing!

[Thai at Heart]

Mr Torsak said the sales of raw tobacco have increased nearly seven times since 1993, indicating that there was no quality control of raw tobacco which is more dangerous to health.

What has the increase in sales of blended tobacco been in the last 20 years?

TTM doesn't sell "blended" tobacco, it sells cigarettes, so all I can assume is that he is talking about the ex factory cost of tobacco once it has been blended having an extra excise tax put on it. I do love the issue that he states, that the increase in tax has not decreased consumption, just his sales only, and that the entire reduction in his sales has been take up by chop chop.

Something is very wrong with the way he has explained this, or logically, TTM would be absorbing smokers who have traded down from the more expensive brands into his segments, thus balancing out the entire price increase, or did half of all smokers STOP completely because of the tax rise? Don't think so. So obviously, his sets of brands are the only ones with price sensitivity and all others are immune? That would be the first cigarette brand I have ever heard with this amazing phenomenon.

Even stranger, that during the excise change over period, there were almost no international cigarettes in the country anyway, so TTM's sales should have jumped massively as people smoked whatever they had on the shelf, and it may well have convinced some that paying a premium for imported fags wasn't worth the difference. All in all, for him to be bleating that his sales are down 50% is absolute twaddle.

[trainman34014]

I doubt that whatever tax increase they could apply would reduce sales by 50%. The seriously addicted smokers would continue to buy even if you dumped a much larger levy on their drug. Of course, any reduction in smokers is good for the health services and all the rest of us in general, but I don't think you can stop people from killing themselves however they choose to.

[Thai at Heart]

Of course, levying it on a per kilo basis can be mitigated by making lighter and lighter cigarettes with less tobacco inside. As far as I know, TTM doesn't have any "light" brands. I think what he is talking about is that on a pack base (assuming 1gram of tobacco per cigarette) this equates to 20 baht a pack extra tax, which pushes their pricing closer to the international brands.

They daren't do it on a value basis because they are essentially overpaying for domestic tobacco to keep the farmers happy.

[jaltsc]

I've noticed fewer Thai smokers these days, but there seems to be an increase in Farang smokers. For them, it's still a cheap addiction to feed in Thailand.

Just imagine if the NO SMOKING statute in restaurants, bars and other public venues was enforced. Then the TTM really would be worried. And... if income taxes were fairly collected, there would be no need to make money off tobacco sales. Plus, think of all the money that would be saved by not having to treat tobacco related diseases. It's not that nothing can be done. It's just that the powers that be will not be able to make money by fixing the problem.

[PattayaPhom]

The excuse for taxation on tobbaco is to deter use, the desired effect has happened, so whats the problem?

[Konini]

I noticed in the last few years we lived in Australia, when tax on ciggies was doubled and then doubled again, more and more people going onto 'Chop Chop' which was under the counter rolling tobacco. Police were often finding illegal tobacco plantations, so it wasn't all (if any) imported. Earlier this year in England, I was surprised at how many people, especially women, were rolling their own. I imagine there is a similar under the counter 'Chop Chop' in UK as there is in Aus, but who knows what this illegal product is being mixed with to make it go further? When it comes to money, I never underestimate greed.

[asiawatcher]

Raw tobacco more dangerous than processed? Hardly. Raw does not contain formaldehyde, you preserve bodies in that crap. Here are some common chemicals found in processed tobacco...

Benzine - petrol additive

Formaldehyde - embalming fluid

Ammonia - toilet cleaner

Acetone - nail polish remover

Tar - derivative of the process of dumping the inhaled smoke in the lungs

Nicotine - a pesticide

Carbon Monoxide - car exhaust fumes

Arsenic - rat poison

Hydrogen cyanide - gas chamber poison

You can do without food for 30+ days, water for 7, oxygen about 60 seconds. And people are still prepared to pay taxes to Govt's for this habit?

[Thai at Heart]

Raw tobacco more dangerous than processed? Hardly. Raw does not contain formaldehyde, you preserve bodies in that crap. Here are some common chemicals found in processed tobacco...

DDR

Benzine - petrol additive

Formaldehyde - embalming fluid

Ammonia - toilet cleaner

Acetone - nail polish remover

Tar - derivative of the process of dumping the inhaled smoke in the lungs

Nicotine - a pesticide

Carbon Monoxide - car exhaust fumes

Arsenic - rat poison

Hydrogen cyanide - gas chamber poison

You can do without food for 30+ days, water for 7, oxygen about 60 seconds. And people are still prepared to pay taxes to Govt's for this habit?

The only difference between raw and processed is basically it is cut. Burn any tobacco leaf and you get those trace chemicals inside the smoke. The manufacturers add some flavors, but to be honest, a cigarette that has had some qc done on it, a filter added, and a maximum limit put on it, tastes hell of a lot better and is relatively safer than chop chop from the market.

Multinationals have unfettered access to the entire global supply, TTM buys Thai first so they are limited in what they can do to improve the taste and quality of their cigarettes. Neither is really healthier than the other, just a cleaner better tasting smoke, but taste is very subjective.

That said, there are no pesticide residue limits for Thai tobacco other than what is exported, all mnc manufacturers follow EU regs.

[bobl]

The excuse for taxation on tobbaco is to deter use, the desired effect has happened, so whats the problem?

Read between the lines of your own question, and you've provided your own answer.

To deter use, is the excuse. Correct. But the real reason for the increase, is for revenue.

So, when sales go down to the extent that you're making less money despite the higher revenue - that's the problem.

[Semper]

Raw tobacco more dangerous than processed? Hardly. Raw does not contain formaldehyde, you preserve bodies in that crap. Here are some common chemicals found in processed tobacco...

Benzine - petrol additive

Formaldehyde - embalming fluid

Ammonia - toilet cleaner

Acetone - nail polish remover

Tar - derivative of the process of dumping the inhaled smoke in the lungs

Nicotine - a pesticide

Carbon Monoxide - car exhaust fumes

Arsenic - rat poison

Hydrogen cyanide - gas chamber poison

You can do without food for 30+ days, water for 7, oxygen about 60 seconds. And people are still prepared to pay taxes to Govt's for this habit?

People are stupid. According to your list, they might as well suck the tailpipe of a car.

[h90]

I would wager that there actually has been no reduction in the consumption of cigarettes, but instead, a considerable hike in the number of cigarettes being illegally imported across the borders.

I used to visit Cambodia regularly, and I was amazed at how cheap cigarettes, wine, beer, etc., were at the border checkpoints. No doubt some local entrepreneur is currently taking advantage of this to flood the Thai market and make a killing!

In companies it is common that if someone goes to Hat Yai, he or she get an order list, black label and ciggis. No doubt on the border to Cambodia it will be the same.

[rfukata]

"He claimed that cigarettes from neighbouring countries--particularly China--will easily flow into Thailand when the ASEAN Economic Community takes effect in 2015"

counterfeit cigarettes from neighboring countries are already flowing in from China, Cambodia,Lao, Vietnam, Myanmar, why even pay for the real stuff when the fakes are significantly cheaper.?

[Thai at Heart]

I would wager that there actually has been no reduction in the consumption of cigarettes, but instead, a considerable hike in the number of cigarettes being illegally imported across the borders.

I used to visit Cambodia regularly, and I was amazed at how cheap cigarettes, wine, beer, etc., were at the border checkpoints. No doubt some local entrepreneur is currently taking advantage of this to flood the Thai market and make a killing!

In companies it is common that if someone goes to Hat Yai, he or she get an order list, black label and ciggis. No doubt on the border to Cambodia it will be the same.

Corruption in customs in Thailand? Surely not. TTM is completely ill equipped to defend itself in a freer Asean, they will get eaten alive by the MNC's and other regional producers. Better to sell it now.

[Fozfromoz]

Raw tobacco more dangerous than processed? Hardly. Raw does not contain formaldehyde, you preserve bodies in that crap. Here are some common chemicals found in processed tobacco...

Benzine - petrol additive

Formaldehyde - embalming fluid

Ammonia - toilet cleaner

Acetone - nail polish remover

Tar - derivative of the process of dumping the inhaled smoke in the lungs

Nicotine - a pesticide

Carbon Monoxide - car exhaust fumes

Arsenic - rat poison

Hydrogen cyanide - gas chamber poison

You can do without food for 30+ days, water for 7, oxygen about 60 seconds. And people are still prepared to pay taxes to Govt's for this habit?

People are stupid. According to your list, they might as well suck the tailpipe of a car.

Living in Bangkok probably equates to the same.

[steve down under]

I noticed in the last few years we lived in Australia, when tax on ciggies was doubled and then doubled again, more and more people going onto 'Chop Chop' which was under the counter rolling tobacco. Police were often finding illegal tobacco plantations, so it wasn't all (if any) imported. Earlier this year in England, I was surprised at how many people, especially women, were rolling their own. I imagine there is a similar under the counter 'Chop Chop' in UK as there is in Aus, but who knows what this illegal product is being mixed with to make it go further? When it comes to money, I never underestimate greed.

Not Chop Chop as such but usually brand name tobacco bought into the UK illegally from mainland Europe where it is still relatively cheap to buy per 50gram pouch than it is in the uk ! last time I was there i was buying from an old mate for around 4 quid a pouch compared to about 12 quid in tesco's so basically 3 for 1 !

[Pormax]

I am a smoker and have been for 40+ years. My whole working life I have worked in the medical proffession. I have no problem with any tax hike on cigarettes if it will stop some of us smokers, but that is up to individuals. I agree it is not a healthy habit and I am aware that it is frowned upon by many in society and though a minimal risk there are medical problems with passive smoking.

Even before the change of laws I would never smoke in a restaurant even if it was allowed, nor would I smoke in a public building.

However having worked a number of years in a caualty department I believe much more money is spent in the health services by those that drink alcohol than those that smoke. Related problems to drinking alcohol that are seen every weekend in casualty units are injuries due to the following: car accidents, brawls and domestic violence. There is then the health related problems aswell such as liver sclerosis for those that drink to excess.

I personally would like higher taxes on all forms of alcohol aswell as cigarettes.

Unfortunately if this happens many people will stilll find the money to feed their habit, possibly at the expense of feeding their family.

[Thai at Heart]

I noticed in the last few years we lived in Australia, when tax on ciggies was doubled and then doubled again, more and more people going onto 'Chop Chop' which was under the counter rolling tobacco. Police were often finding illegal tobacco plantations, so it wasn't all (if any) imported. Earlier this year in England, I was surprised at how many people, especially women, were rolling their own. I imagine there is a similar under the counter 'Chop Chop' in UK as there is in Aus, but who knows what this illegal product is being mixed with to make it go further? When it comes to money, I never underestimate greed.

Not Chop Chop as such but usually brand name tobacco bought into the UK illegally from mainland Europe where it is still relatively cheap to buy per 50gram pouch than it is in the uk ! last time I was there i was buying from an old mate for around 4 quid a pouch compared to about 12 quid in tesco's so basically 3 for 1 !

A little insight. Roll your own actually contains the better quality tobacco around, with no stems or small fragments added. A large percentage is stripped from the stem by hand instead of machine threshed.

[Thai at Heart]

I am a smoker and have been for 40+ years. My whole working life I have worked in the medical proffession. I have no problem with any tax hike on cigarettes if it will stop some of us smokers, but that is up to individuals. I agree it is not a healthy habit and I am aware that it is frowned upon by many in society and though a minimal risk there are medical problems with passive smoking.

Even before the change of laws I would never smoke in a restaurant even if it was allowed, nor would I smoke in a public building.

However having worked a number of years in a caualty department I believe much more money is spent in the health services by those that drink alcohol than those that smoke. Related problems to drinking alcohol that are seen every weekend in casualty units are injuries due to the following: car accidents, brawls and domestic violence. There is then the health related problems aswell such as liver sclerosis for those that drink to excess.

I personally would like higher taxes on all forms of alcohol aswell as cigarettes.

Unfortunately if this happens many people will stilll find the money to feed their habit, possibly at the expense of feeding their family.

Couldn't agree more.

[Sayonarax]

Hello, Black market tobacco trading! Nice work tax man.

[lizardtongue]

I would wager that there actually has been no reduction in the consumption of cigarettes, but instead, a considerable hike in the number of cigarettes being illegally imported across the borders.

I used to visit Cambodia regularly, and I was amazed at how cheap cigarettes, wine, beer, etc., were at the border checkpoints. No doubt some local entrepreneur is currently taking advantage of this to flood the Thai market and make a killing!

In companies it is common that if someone goes to Hat Yai, he or she get an order list, black label and ciggis. No doubt on the border to Cambodia it will be the same.

Yes but the quality of the Myanmar ciggs is crap!

[Thai at Heart]

I would wager that there actually has been no reduction in the consumption of cigarettes, but instead, a considerable hike in the number of cigarettes being illegally imported across the borders.

I used to visit Cambodia regularly, and I was amazed at how cheap cigarettes, wine, beer, etc., were at the border checkpoints. No doubt some local entrepreneur is currently taking advantage of this to flood the Thai market and make a killing!

In companies it is common that if someone goes to Hat Yai, he or she get an order list, black label and ciggis. No doubt on the border to Cambodia it will be the same.

Yes but the quality of the Myanmar ciggs is crap!

yeah and they are all fakes too. Like anyone would bother to invest millions in machinery, fake packaging and the rest to be able to make them cheaper than the real manufacturers. It's like believing your coke is fake.

[market trader]

GOOD!!!!! They should double it then!

And triple it for beer and alcohol

[Ricardo]

yeah and they are all fakes too. Like anyone would bother to invest millions in machinery, fake packaging and the rest to be able to make them cheaper than the real manufacturers. It's like believing your coke is fake.

But I can imagine how a manufacturer, whose regular brands are suffering from falling-demand, might be tempted to run-off a few million for some influential smuggler person offering cash.

I always remember the industry-rumour about the night-shift, in one Indian cigarrette-factory, who worked an extra shift in-secret one week-end, and sold the output & divied-up the proceeds !

[Semper]

GOOD!!!!! They should double it then!

And triple it for beer and alcohol

......and quadruple it for benzine, gasohol and diesel.