Burma slashes tax on alcohol and tobacco

The Burmese government has slashed duty tax on locally-produced alcohol and tobacco by a third in a move likely to raise eyebrows among health professionals and planners.

The tax was cut from 75 percent of the product value to 50 percent, a sharp fall considering the comparatively cheap prices already awarded to such products. In Thailand a packet of locally-produced Crown Tip cigarettes costs 56 baht (US$1.70) while its equivalent in Burma, Red Ruby, costs 650 kyat (US$0.65), and Thai shoppers flock to border towns for bargains on products such as alcohol, tobacco, Viagra and fake DVDs.

The Burmese government has also raised duty on imported tobacco and alcohol to 100 percent. The changes in taxation took place on the 1 June.

The World Health Organisation (WHO) noted in a 2009 report that there was a “global tobacco epidemic” fuelled by big tobacco companies pressuring governments to reduce taxes and regulations that prevent people from smoking.

In the context of the Association of Southeast Asian Nations (ASEAN), Burma’s pending implementation of the bloc’s Free Trade Area tariff policies may be behind the move, which could in effect be to bolster the domestic producers and brands before Burma is required to reduce tariffs.

Burma became an ASEAN member in 1997 thus joined the 1992 ASEAN Free Trade Area (AFTA), but membership does not require immediate accession to the bloc’s policies. For example, Burma may not have to implement a reduction in tariffs until 2015.

According to the WHO, the birth of the AFTA caused a sharp rise in cigarette consumption in Thailand: foreign brands were imported with lower duty from signatory nations, primarily the Philippines, where multinational tobacco companies manufactured their goods.

Most of the growth in the tobacco market is in the Third World. Foreign tobacco companies have lessened their presence in Burma, ever aware perhaps of the damaging PR they have received over the harm of their products, while British American Tobacco (BAT) pulled out of Burma because of concerns about the human rights record of the junta.

The government meanwhile is believed to have vested interests in the tobacco sector. The Union of Myanmar Economic Holdings Limited (UMEHL) is a parastatal company run by the military’s quarter-master general. They have undertaken joint projects with multinationals, including tobacco company Rothmans, in the 1990s before being subsequently brought by BAT, who later withdrew. BAT used to produce in collaboration with the government the London brand, Burma’s  most popular cigarette.

Despite suggestions that BAT still operates in the country, a 6 November 2003 press release from the company noted they sold their 60 percent share in Rothmans Pall Mall Myanmar company to an unnamed Singaporean investment company.

There are at least two major state-owned cigarette factories, one in Rangoon the other in Pakokku. These held a near-monopoly on the cigarette market until around 1996-97, when private factories and brands started to penetrate the market, even though state factory production continued to soar.

Burma’s junta chief, Than Shwe, is however rumoured to be against smoking and is said to have been a driving force behind a move to ban smoking in public spaces. The enforcement of this rule is negligible however, with an estimated 50 percent of Burma’s adult population thought to smoke.

The latest move will no doubt be viewed as questionable by health professionals. The WHO’s Nyo Nyo Kyaing noted in a 2003 report that, far from reducing taxation, the government should increase taxation of tobacco by 5 percent above inflation year-on-year. The WHO officicial also said in the report that real prices of all tobacco products have declined since 1988.

However the largest sector within the tobacco industry remains the cottage industry cheroot manufacturing. Production of the cigar-like device employs thousands of mainly female labourers who bring in a small, yet vital, income to rural families, which could be threatened by greater penetration of the Burmese market by multinational companies.

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