Tax structure hits TTM

The state-run Thailand Tobacco Monopoly (TTM) is expecting to make the first loss of its 79-year history following the imposition of new excise tax rates that, it claims, have benefited importers of foreign cigarettes, according to a story in The Bangkok Post.
The TTM will make a loss of about 1.5 billion baht this year because it has not been able to reduce its spending in light of the new tax, which was implemented in September, said Daonoi Suttiniphapunt, the company’s MD.
Under the new tax structure, packs of cigarettes with a retail price of more than 60 baht are subject to a 40 percent levy, while cheaper packs attract a rate of 20 percent.
Daonoi said that the suppliers of some foreign brands had lowered their prices to avoid the high tax. This was possible for them because they bore lower production costs than did the TTM.
It was not financially viable for the TTM to reduce its cigarette prices and, as a result, it had lost market share to its competitors.
At present, TTM’s sales accounted for about 55 percent of the market, down from 80 percent before the tax-structure change.
Daonoi said also that the Finance Ministry-owned state enterprise was shouldering huge costs in relation to employment, unmanufactured tobacco and the development of a new factory, due to be ready in 2020.
The TTM employed more than 3,000 staff, compared with only 1,000 employed by foreign cigarette manufacturers, while the TTM was required to buy domestic tobacco at “unusually high prices”, she said.
The state enterprise is said to be paying growers 22 baht per kg – higher than the market price.
But with the drop in cigarette sales, the TTM is expected to buy 40 percent less tobacco this year than it did last year.
Other spending that contributes to the TTM’s financial state includes running a hospital and investment in a public park inside its factory compound.
Daonoi admitted that liquidity was likely to become an issue from May onward, after which the TTM would seek its first-ever loan.
In the meantime, the TTM has called on the Excise Department to revise the new tax structure.
It is also making preparations to allow it to manufacturer non-TTM brands, and to sell TTM brands overseas.