As sin taxes loom, cigarette industry looks to Thailand to buy up excess supply

Cigarette makers worried about the impact of new sin taxes are looking to Thailand to buy up a large part of their unpurchased supply. The Department of Trade and Industry is expecting an increase in tobacco exports to Thailand once the country complies with a ruling by the World Trade Organization (WTO) Data shows that the Philippines is already the top exporter of cigarettes to Thailand, with an estimated two-fifths share of the Thai cigarette market. The WTO had ruled that re-sale taxes on imported cigarettes in Thailand be lowered to make them at par with domestic cigarettes. “Once fully complied, the WTO ruling would mean improved market access for our tobacco exports in Thailand,” Trade Undersecretary Adrian Cristobal Jr. said on Monday. Legislators in the Philippines are in the final stages of haggling over a proposed sin tax law that will not only make cigarettes more expensive but is expected to drastically lower local demand for tobacco products. Discussions with Thailand over cigarettes The Philippines and Thailand have been engaged in a series of bilateral discussions to facilitate Thailand’s compliance with the July 2011 ruling, which favored the Philippines. The ruling had granted Thailand a reasonable period of time (RPT), until May 15, 2012, to implement the WTO ruling. It was later granted a second RPT with Oct. 15 as the deadline. The second RPT involved WTO’s finding that imported cigarettes were subjected to discriminatory tax treatment relative to domestic cigarettes. Under Thailand’s law, the re-sale of domestic cigarettes was exempted entirely from value-added tax, without extending similar treatment to re-sales of imported cigarettes. Thailand has adopted a Royal Decree, effective Oct. 15, to abolish the discriminatory exemption. This, said Cristobal, "shows the benefits of these bilateral meetings." “Our fundamental goal is to promote our national interest and we have fully preserved our rights in this dispute. The Philippine government, through the Philippine Mission to the WTO, is working closely to ensure Thailand's full compliance,” Cristobal said. The WTO ruling was the first to describe in detail how the WTO rules on customs valuation should be applied, particularly when the transaction value is rejected by customs authorities and customs value is to be established. — BM/HS, GMA News