WTO ruling on cigarette

The World Trade Organisation (WTO) is to deliver its final ruling on a tax dispute between Thailand and the Philippines next week.

The ruling is expected to have an impact on the tax system, the cigarette industry and customs valuation practice.

The Philippine government in 2008 petitioned the WTO that Thailand was conducting unfair customs practice by rejecting the import price declared by US-based Philip Morris for cigarettes it manufactured in the Philippines.

Declared import price is used as a base for tax calculation, and Thai authorities suspected the company was declaring an artificially low price to avoid paying full taxes.

Tammy Chan, general manager of Philip Morris (Thailand), said the WTO's final ruling was due on June 17 and it would be an imporฌtant guideline for customs valuation.

The WTO disputesettlement panel ruled previously in favour of the company. The Thai government appealed against the ruling, but the Customs Department currently accepts the import price declared by Philip Morris.

The Department of Special Investigation has been investigating the case and the Opposition Pheu Thai raised the issue during the noconfiฌdence debate in March against the Democratled government, accusing it of helping Philip Morris evade tax payment.

Chan said her company was looking forward to tax reform in Thailand, which would make the system more transparent and predictable.

In response to the issue, the Excise Department has proposed collecting excise tax on the retail price of cigarettes instead of the factory price and CIF (cost, insurance and freight) for imported products. The proposal is pending consideration by the new government, after next month's general election.

Chan expressed support for the proposal, as it would apply to everyone. But the Thailand Tobacco Monopoly has objected to it, saying that TTM would have to bear a greater tax burden than its competitors under such a scheme. As of April, TTM had a market share of 76.8 per cent, and Philip Morris 20.6 per cent.

Charonchai Salyapong, director of corporate affairs at Philip Morris, claimed that its market share had been at this level for many years, and had not sharply increased as many believe.

Charonchai said the tax rate on cigarettes was quite high - 67.8 per cent of the price of a pack of smokes - while laws and regulations on smoking were also strict.

The number of smokers in Thailand last year was 9.5 million, or 18.1 per cent of the population, down from 22.5 per cent in 2001.

June 10, 2011

By Wichit Chaitrong

Source: The Nation