Taxation Strategy to Reduce Overall Alcohol Beverage and Contaminated Liquor Consumption Taxation Strategy to Reduce Overall Alcohol Beverage and Contaminated Liquor Consumption Dr.Bundit Sornpaisarn Center for Alcohol Studies (CAS) July 13th, 2005

ปริมาณจำหน่ายสุราในประเทศ

สถานการณ์การบริโภค แอลกอฮอล์ของสังคมไทย ปรับเป็นปริมาณแอลกอฮอลล์บริสุทธิ์โดยประมาณ เบียร์ ไวน์ และสุรากลั่นมี แอลกอ ฮอลล์บริสุทธิ์เท่ากับ 4.5%, 14% และ 42% ตามลำดับ จากฐานข้อมูล WHO-alcohol consumption database

อันดับการบริโภคเครื่องดื่มแอลกอฮอล์ ของประเทศไทย

Figure 1 : Injury and mortality rate (per 100,000 populations) between 1984 and 2001

Figure 2 :Liver disease and cirrhosis mortality rate and per capita consumption between 1977 and 2001

Figure3 : Thai consumption per capita of pure commercial alcohol (for over 15s) and GDP per capita (1961 – 2000)

Issues Objective of Raising Tax Objective of Raising Tax Decrease Alcohol Consumption or Increase Government Income or Both Decrease Alcohol Consumption or Increase Government Income or Both Important Principles Important Principles The Alcoholic Beverages’ Price should be relatively lower all The Alcoholic Beverages’ Price should be relatively lower all No any beverages’ price decreased No any beverages’ price decreased Low Price Alcoholic Beverages should be increased Low Price Alcoholic Beverages should be increased

Thailand Taxation System on Alcohol

Thailand’s Taxation on Alcohol Customs Duty [60%, 5%] Customs Duty [60%, 5%] Excise Tax [Specific, Ad Valorem Rate] Excise Tax [Specific, Ad Valorem Rate] Local Tax [10%ET] Local Tax [10%ET] Health Tax [2%ET] Health Tax [2%ET] Value Added Tax [7%] Value Added Tax [7%] C.I.F. Cost of Product +Production Profit Customs Duty Excise Tax Lo cal Heal th VAT

Alcohol Taxation in Thailand based on the Liquor Act B.E.2493 (A.C. 1950) Combination Rate (both Specific and Ad Valorem Rate) and the applicable rate is whichever is higher (“2 Chosen 1”) Combination Rate (both Specific and Ad Valorem Rate) and the applicable rate is whichever is higher (“2 Chosen 1”) 2 types of Tax Rates 2 types of Tax Rates Specific Rate: a uniform rate based on the volume of alcohol content Specific Rate: a uniform rate based on the volume of alcohol content Ad Valorem Rate: a percentage of the value of the product Ad Valorem Rate: a percentage of the value of the product

Example of Specific Rate Application Tax Value = Degree * Volume of Spirit in bottle * Specific Rate Tax Value = Degree * Volume of Spirit in bottle * Specific Rate Special Blended Spirit 35 degree, 750 c.c./bottle, Specific Rate 240 bahts / liter of pure alcohol Special Blended Spirit 35 degree, 750 c.c./bottle, Specific Rate 240 bahts / liter of pure alcohol Tax Value = 35% * 750/1000 * 240 Tax Value = 35% * 750/1000 * 240 = 63 bahts = 63 bahts

“More (Health & Social) Harmful, More Tax”

Ad Valorem Rate Application Excise Tax Value Excise Tax Value = Selling Price at manufacture * Ad Valorem Rate

Before Tax Price Local Tax Excise Tax + + Before Tax Price Excise Tax Local Tax Selling Price at Manufacture Inclusive Rate Exclusive Rate Inclusive Rate 50% = Exclusive Rate 111% * BP Bahts * SP Bahts * ET Bahts

“More Luxury, More Tax”

2 Chosen 1 of Thailand S : AV (Time) AV B B 3.78 B 6. Local Beer-2 6 degrees 630 c.c. 6 degrees 630 c.c. AV B B B 5. Local Beer degrees 640 c.c. 6.4 degrees 640 c.c. AV B B 4. Imported Deluxe Wisky 43 degrees 750 c.c. 43 degrees 750 c.c. S B B B S 63 B B 63 B 2. Special Blended Spirit 35 degrees 750 c.c. 35 degrees 750 c.c. S B 8.64 B B 1. Local White Spirit 40 degrees 625 c.c. 40 degrees 625 c.c. The Actual Tax Tax Value from Ad Valorem Method Tax Value from Specific Method Type of Spirit 3. Imported Economy Wisky 35 degrees 700 c.c.

Comparison of Tax Cost by Different Tax System Local White Spirit Imported Economy Wisky Local Beer-1 Types of Spirit Baht / Liter of Pure Alcohol 2 Chosen 1 Special Blended Spirit Imported Deluxe Wisky Local Beer-2 Specific Method only Ad Valorem Method only

Keep 2 Chosen 1 Maximum Benefit from both Specific : “More Harmful, More Tax” Ad Valorem : “More Luxury, More Tax” Because it is more than or equal to Specific Method Only already

Current Excise Tax Rate and Legislative Rate 92% % Local Beer-1 100% % Imported Economy Wisky 42%256070%70100 Com. Fermented Spirit 100%505060% Imported Deluxe Wisky Special Blended Spirit 100%505060% Current Rate Ad Valorem Rate 100% 100% Local Beer-2 50% 17.5 % Local White Spirit % of Legislative Rate Current Rate Legis lative Rate Specific Rate

Evolution of Alcohol Tax Rate (Specific)

Evolution of Alcohol Tax Rate (Ad Valorem)

Recommendation on Taxation Recommendation on Taxation 1.1 Keep 2 Chosen Increase Alcohol Tax Rate up to ceiling

Other Legislative Measures 2.1 Enforcement on Alcohol Production Quality Control 2.2 Enforcement on Existing Laws and Establish new Laws for Alcohol Consumption and Consequences Control 2.3 Enforcement on Illegal Alcohol Production Control

Conclusions Increase Tax for Decreasing Alcohol Consumption Recommendation Keep 2 Chosen 1 Keep 2 Chosen 1 Increase Tax Rate up to Ceiling Increase Tax Rate up to Ceiling Enforcement on Enforcement on Production Quality Control Production Quality Control Consumption and Consequences Control Consumption and Consequences Control Illegal Production Control Illegal Production ControlResults Overall Tax / Price of Alcohol Market Increased Overall Tax / Price of Alcohol Market Increased Consumption and Consequences Decrease Consumption and Consequences Decrease Government’s Revenue Increased Government’s Revenue Increased

Thank you รศ. นพ. ยงยุทธ ขจรธรรม รศ. นพ. ยงยุทธ ขจรธรรม รศ. นพ. วิชัย โปษยะ จินดา รศ. นพ. วิชัย โปษยะ จินดา แม่ ภรรยา และลูกๆ แม่ ภรรยา และลูกๆ