The excise tax on cigarettes is taking a bite out of Thailand Tobacco Monopoly (TTM), which expects a 1.5-billion-baht loss this fiscal year, widening to 4-5 billion baht in fiscal 2020.
The state-owned cigarette maker's sales will be 17 billion baht in fiscal 2018, falling short of the 28-billion target, said managing director Daonoi Suthinipaphan.
Fiscal 2018 ends on Sept 30, 2018.
The impact from the excise tax structure will hit TTM harder once the single rate of 40% of the suggested retail price goes into effect for the 2020 fiscal year, in contrast with the current rate of 20-40%, resulting in a further 4-5 billion baht in losses, she said.
TTM recorded a profit of 9 billion baht in fiscal 2016.
Under the new tax structure, cigarettes are liable for tax both in terms of volume and value, regardless of price. The tax took effect on Sept 16.
The levy in terms of volume was increased to 1.20 baht per cigarette from 1.10, while the tax based on value, which is divided into two rates -- 20% of suggested retail price for cigarettes priced below 60 baht per pack and 40% for those priced more than 60. In two years the excise tax for cigarette packs priced 60 baht or lower will be raised to 40% -- the same rate applied to packs priced above 60 baht.
Ms Daonoi said makers of imported cigarettes have taken a competitive edge from the current excise tax structure, under which their premium brands shoulder a smaller tax burden, by using the lowered tax to subsidise cheaper brands, while all brands produced by TTM are subject to a higher tax.
She gave TTM's SMS brand as an example. SMS, which was sold to consumers at 51 baht per pack under the previous excise tax regime, had a profit of seven baht per pack. But the brand's current profit per pack is a mere 98 satang, though its retail price was increased to 60.
Moreover, its profit drops to 28 satang when taking into account a 70-satang per pack contribution that must be paid to several social funds.
After the current tax structure was implemented, TTM's market share declined to 65.9% from 80%.
