Tobacco Monopoly Changing Image to Meet Challenges

Source from:  Nation Multimedia 03/31/2011

The Thailand Tobacco Monopoly is taking on a new image as it braces for a tougher market with a cost disadvantage to imports. "The new tax [system] could make us pay more taxes than import products," Amnuay Preemanawong, inspector-general at the Finance Ministry and chairman of the TTM, said yesterday. The rebranding could help the TTM communicate more efficiently with smokers, he said. "We face many challenges - competition from imported cigarettes, campaigns against smoking and tough health rules and regulations," he said. The TTM will maintain its current revenue and profits. The state enterprise usually transfers about Bt50 billion of its net income to the government's coffers every year. Last year it passed on Bt55 billion to the ministry. Foreign cigarettes could increase their share up 20 per cent of the Bt70-billion market annually, Amnuay said. Amnart Permchart, acting managing director of TTM, said he was concerned about the change in how tobacco excise taxes are assessed. The Excise Department is planning to levy the tax on retail prices instead of the factory price for local products and the CIF (cost, insurance and freight) price for imported products, as is the current practice. The department would also set a floor price for cigarettes at about Bt20 per pack so more taxes could be collected from cheaper imports. The TTM not only pays excise taxes at about 560 per cent of prices, it also pay income taxes to the Revenue Department. Currently it pays taxes of about Bt700 million to the Revenue Department. The new tax would increase tax expens?es to Bt1 billion. "Our profits are expected to fall if the tax hike is imposed, as the Excise Department has planned," he said. Local products dominate the low and medium markets while foreign products control the premium market. Cheap foreign products have grabbed 4 per cent of the market, up sharply from 0.4 per cent pre?viously. Products from Indonesia and China sell for only Bt1.50 or Bt2 per pack. The new tax method would increase the competitive advantage of cheap products while letting premium products pay less tax, he added. Amnuay said construction of the TTM's Bt46-billion factory at Rojana Industrial Park in Ayutthaya would commence next month. Bidding for Bt3.2 billion worth of equipment and Bt3.4 billion worth of tobacco leaves would also be opened. During the recent censure debate, opposition Pheu Thai MPs accused the government of failing to prevent foreign tobacco products from gaining market share, and the TTM of failing to protect the interests of the organisation by favouring a cigarette distributor, Saha Samit Partnership. Enditem