Thailand earmarks tobacco tax revenues for tobacco control
Thailand, a leader in tobacco control, levied an 83.5% statutory excise tax on cigarettes, which in 2008 resulted in an overall tax rate of 57% of the actual retail pack price. An important feature of Thailand’s tax structure is a 2% tax surcharge, collected on both tobacco and alcohol, that is earmarked for a broad agenda of national health promotion programs. The 2% excise earmark, established in Thailand’s Health Promotion Foundation Act of 2001, secures funding for the Thai Health Promotion Foundation (ThaiHealth) and provides annual revenues of about US$ 35 million. With this funding, ThaiHealth seeks to reduce sickness and death and make general improvements in quality of life.
Another strong feature of Thailand’s cigarette tax structure is that cigarette excise taxes have been increased more rapidly than the inflation rate. As a result, the relative affordability of cigarettes has decreased. In January 1992, at a time when adult smoking prevalence was 30% (nearly 60% among males), the excise rate was set at 55%. The tax rate was increased to the current 83.5% in a series of eight steps, which increased the retail price of the most popular brand by nearly 400% and nearly tripled Thailand’s annual tobacco tax revenues. Adult smoking rates have now decreased to about 18%, with youth male smoking rates about half of adult male rates.
Thailand levies taxes on all cigarette products at a single rate, which simplifies calculation and collection of taxes. Because the domestic tobacco industry is state-controlled, the government can set the wholesale factory price, thus ensuring that manufacturers are unable to reduce prices to counter the effects of increased taxation. Industry price manipulation is an important concern in countries that rely solely on ad valorem tax and that do not have a state-controlled tobacco industry.
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