# **Box 2**

# **Taxes on Tobacco and Alcohol in ASEAN**

Taxes on alcohol and tobacco have declined significantly in terms of their revenue importance in many ASEAN countries over time both because of the rising importance of general taxes like VAT and the specific nature of many excise taxes. However, these taxes remain important sources of revenue in some countries in the region, as indicated in Table 1. Tobacco taxes, for example, provided 8.4% of total taxes in Indonesia in 2007 (Barber et al 2008) compared to 2.3% in Thailand, where, however, taxes on alcohol provided another 4.6% (Bhoocha‐oom 2009). As the table suggests, these taxes are of very varying importance in different countries.

**Table 1**

**Excise Tax Revenue in some ASEAN Countries (%)**

|**Country**|Taxes/GDP<br>(2010)|Excises/Taxes<br>(2010)|Excises/Taxes<br>(2000)|Excises/Taxes<br>(1976)|Tobacco<br>Tax/Taxes<br>(1976)|Alcohol<br>Tax/Taxes<br>(1976)|
|---|---|---|---|---|---|---|
|Cambodia|8.2|17.1|16.3||||
|Indonesia|12.3|10.3|6.4|4.6|3.9|0.2|
|Lao DPR|13.3|22.8|18.7||||
|Malaysia|16.5|7.1|10.5|10.0|0.7|1.5|
|Philippines|14.2|5.9|12.9|15.9|4.7|1.9|
|Thailand|16.5|20.7|25.6|22.2|7.5|6.7|
|Vietnam|21.5|9.3|8.8||||

_Notes:_ The data in this table have been compiled from a number of not fully compatible sources Years shown are approximate and the nature of some taxes has changed substantially over time: for example, initially imports were not subject to excise duties in some countries.

_Sources:_ IMF GFS, Cnossen (2007), and Asher and Booth (1983).

There is also little similarity between the detailed structure of alcohol and tobacco taxes across countries in the region – something that other studies have also found to be true in other regions.<sup>18</sup> Although excise rate structures are difficult to compare owing to their detailed and often specific nature, a simplified comparison shown in Table 2 depicts wide variations in the level of taxation in different countries. Although most countries in the region have increased their rates to some extent and some have altered the structure of these taxes in recent years, there has been little convergence in either respect. Comparison of Asher and Booth (1983), Cnossen (2007) and World Bank (2014) suggests that the divergences between countries in the importance and structure of alcohol and tobacco taxes have not altered much over the years. Wide differences in tax structure remain with one, the other, or both tobacco and alcohol being taxed (in addition to the general VAT) by special excise taxes on either an _ad valorem_ or a specific rate basis or in some cases a composite _ad valorem_ and specific system.. The tax bases also differ from country to country. _Ad valorem_ taxes like those in Cambodia and Vietnam are based on ex‐factory price (or CIF + import duty for imports). However, Thailand uses the ‘last wholesale’ price and the Philippines ‘net retail price’ (i.e. sales price excluding VAT and excise) based on a survey of retail outlets. Indonesia also uses prices to distinguish different specific rate classes. Singapore (not

> 18 For example, see Bird and Wallace (2010) on sub‐Saharan Africa and O’Hagan and Riley (2005) on Europe.

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