Hike in excise on cigarettes and liquor backed

Economy August 22, 2012 00:00

By The Nation

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Smokers of imported and local cigarette brands, plus drinkers of liquor - known locally as lao khao - will be hit by a rise in excise tax. The Cabinet yesterday backed a higher excise on cigarettes and white liquor, citing a policy to boost the health of

But some observers said the “sin tax” hike was a desperate bid to help the country’s cash-flow problem. Drinkers of beer and wine will not be affected, because the hike, which is effective from today, will not be imposed on such drinks.
Bt13 billion extra revenue
The hike is expected to raise about Bt13 billion annually, Excise Department director-general Benja Louicharoen said yesterday. The hike would be beneficial in terms of tax collected on cigarettes on the by-value basis, because rates on cigarettes would be the same, however cheap the old rates were.
“However expensive or cheap the cigarettes, the rates will be the same after the hike, as cigarettes are detrimental to health, whatever the brand,” she said. The hike had to take effect immediately to stop hoarding or favouring any traders, she added.
The rate on blended whiskey will increase to Bt350 from Bt300 per litre, while the rate on white spirit would rise to Bt150 from Bt120, and the rate on imported whiskey would be Bt400 per litre. 
For cigarettes, the hike will see an increase of between Bt6 to Bt8 per packet of eight local and imported brands, Benja said.
Cigarette hike 2% on average
The hike on cigarettes was about two per cent on average, from 85 per cent to 87 per cent, while the Excise Department can increase it to 90 per cent – a legal ceiling – which meant another hike in the future was possible, Benja said. On the hike on liquor, she said the tax on white spirit was chosen, with the rate not reaching the ceiling, because it had not been increased for a long time.
“The hike in taxes on liquor should mobilise around Bt2 billion to Bt3 billion each year,” she said. The new prices per-bottle of white spirits, which is consumed mostly by low-income earners, should be around Bt5 to Bt8 more, and not more than Bt10, she said.
The hike would inevitably affect Blend 258, a local brand which is the market leader. Produced by Thai Beverage Plc, it sold three million cases last year, a source in the industry said. ThaiBev’s Hong Thong, Mekong, and Sangsom brands will also be hit.
Surapol Supradit, a consultant in development and tax for the Excise Department, said later the excise hike on liquor would raise about Bt2 billion in tax revenue annually. But it was unlikely to affect consumption, as drinkers were not sensitive to price of alcoholic beverage. 
The hike may cause the retail price of white spirit to rise by no more than Bt10 a bottle, he said. 
In regard to different tax rates for locally produced and imported drinks, an excise tax official who asked not to be named said it did not counter agreements under the World Trade Organisation, since different tax rates apply to different kinds of liquor. 
An industry source said the rises showed the government was looking to generate extra revenue in order to compensate for revenue that had been lost. 
It also showed the government was trying to reduce inequality between local and imported alcohol companies, which has recently been a topic of discussion. 
Drinkers may switch to beer
The source said the tax hike would raise the retail price of blended spirit by Bt5 to Bt7 per bottle but would have no significant impact to consumption. However, some price-sensitive drinkers may switch to beer, which could benefit from the change.
The tax rate for brandy – a special spirit, and the last type of imported alcohol for which the tax rate has not yet reached the limit – will be raised from 48 per cent to its limit of 50 per cent (by sale value). 
Imported scotch whiskeys, however, would get no benefit from the rise, as the price gap with blended liquors is still high.
Another industry source said: “Every few years there has been an increase in excise taxes. The last one was three years ago, so this is nothing unexpected. We don’t foresee a significant impact.”