Excise tax increases that significantly raise tobacco product prices and reduce their affordability are among the most effective fiscal measures to reduce tobacco consumption (and thereby its adverse health consequences) by discouraging purchase of tobacco products, thereby encouraging tobacco cessation and preventing tobacco uptake among various segments of the population, in particular price-sensitive young people and the poor. Tobacco taxes can therefore have large aggregate benefits for public health and socio-economic development, primarily through healthier and more productive populations and reduced healthcare costs, reducing poverty, and providing a reliable source of government revenues. For these reasons, tobacco tax increases are described as a win-win policy measure, i.e. a highly cost-effective WHO “best buy” public health intervention and a reliable source of domestic financing.

The World Bank has recommended that the total tax burden should be 66% to 80% of the retail price, and more recently, the WHO has recommended that at least 70% of retail price should be excise. The current global guidance for tobacco taxation, however, remains to be WHO FCTC Article 6 and its implementation guidelines (adopted by the WHO FCTC COP in 2014), which recommend that governments should adopt long-term tax and price policies that meet both their public health and fiscal needs.

This means applying specific or mixed (specific and ad valorem) taxes on all tobacco products, taxing all tobacco products in a similar way (to reduce the potential for product substitution), and regularly increasing tax rates so as to continually reduce affordability of tobacco products. This also means strengthening tobacco tax administration (licensing, warehousing, anti-forestalling, fiscal markings, and enforcement), considering dedicating tobacco tax revenues to tobacco control programmes, and prohibiting or restricting tax/duty-free sales of tobacco products .

This chapter provides an overview of the tobacco tax situation in ASEAN countries, where tax policies have been strengthened in some countries, but require more improvements in others. Thailand has the highest tax burden as a percentage of retail price (78.6%), followed closely by Philippines (71.3%) and Singapore (67.5%). These countries are good examples where tax increases have contributed to a decline in smoking prevalence rates alongside higher tobacco tax revenues. Most countries also do not have any long-term tobacco tax policies with regularly evaluated fiscal and public health targets. Cigarette prices remain affordable and relatively low throughout the region, particularly in Cambodia, Lao PDR, and Vietnam (less than USD 1 per pack) where regular tax increases are needed to keep pace with economic and income growth.

In the case of Lao PDR, the government's lopsided Investment License Agreement (2001-2026) with Imperial Brands prevents the Lao government from benefiting, as the government continues to lose millions in tobacco tax revenues (see page 19) while being unable to reduce tobacco use .

Prices of most popular cigarette brands in ASEANClick to enlarge

Thailand raised its cigarette excise rates 11 times (from 55% to 87% of factory price) between 1991 and 2012, which resulted in an almost fourfold gain in revenues from THB 15.89 billion (USD 530 million) to THB 59.91 billion (USD 1,997 million) over the same period. At the same time, overall smoking prevalence dropped from 32% (1991) to 21.4% (2011).

The Thai government has further increased the tax rate to 90% in early 2016, aimed at reducing number of smokers and raising tax revenue by about THB15 billion per annum.

In September 2017, a new tax structure and rate on tobacco came into force to further reduce cigarette affordability in Thailand.