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May 27, 2017

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Lawmakers back tobacco tax, surcharge hikes

TAIPEI, Taiwan -- Lawmakers on Monday voiced their resounding support for the Executive Yuan's proposal to raise the tax on tobacco products by NT$5 and the health and welfare surcharge by NT$20, which may propel the average retail price of cigarettes to nearly NT$100 per pack.

After assessing reports presented by the Ministry of Finance and the Ministry of the Interior on how best to deter the illegal smuggling of cigarettes and improve the health conditions of the populace, the majority of lawmakers voiced their support for the initiative. Lawmakers, however, stated that the tax on tobacco products should be raised at a higher scale than the health and welfare surcharge.

According to amendment proposals submitted by the Ministry of Finance and the Ministry of Health and Welfare, the tax on tobacco products is to be raised from NT$590 per 1,000 cigarettes to NT$840 per 1,000 cigarettes, while the health and welfare surcharge is to be doubled from NT$1,000 to NT$2,000 per 1,000 cigarettes. The move is expected to pad the nation's treasury by about NT$30 billion annually, consisting of NT$5.871 billion derived from the tax on tobacco products and NT$24 billion from health and welfare surcharges.

Following the change, the tobacco tax on each pack of cigarettes will be increased by NT$5, reaching NT$16.8, with the health and welfare surcharges slated to be doubled to NT$40. Total excise taxes and surcharges will reach NT$56.8 with the amount added to per-packet retail price of cigarettes.

According to the Ministry of Health and Welfare, the average retail price of cigarettes may reach as high as NT$95 per pack, compared to NT$70 before the change. Despite the price hikes, the ministry stated that Taiwan's cigarette prices only exceed averages found in South Korea and China and remain lower than Malaysia, Japan, Hong Kong, Singapore, whose prices and excise charges surpass Taiwan by a wide margin.

The ministry emphasized that according to guidelines set by the World Trade Organization, excise charges should represent 70 percent of a pack of cigarette's retail price, and that currently Taiwan has managed to attain 54 percent. There is plenty of wiggle room for additional excise charge hikes before the 70 percent cap is raised, said the ministry, adding that the threshold will be reached with a hike reaching NT$36.7.

Finance Minister Chang Sheng-ford stated that proposed increases in excise taxes and surcharges are designed to deter the consumption of tobacco products, but remarked that the change may propel a rise in illegal smuggling of cigarettes, which are often manufactured by unscrupulous operations that may cause serious harm to those who consume them.

Meanwhile, lawmakers advised that following the change, the tobacco tax and health and welfare surcharge, at NT$16.8 and NT$40, would be deemed unproportional, and that the former should be raised and the latter lowered.

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