Taiwan Today

On the first day when the new cigarette excise tax took effect, there was some chaos and confusion. Cigarette packets sold under the new tax system are packaged differently; but before some of these newly packaged cigarettes could even be put up for sale, the three largest tobacco companies in Taiwan have raised the cost of their own products by NT$5 (US$0.16) per pack. Old-time smokers have been desperately trying, on the one hand, to buy as many packets of the older cigarettes as they can,while on the other hand they have asked the Fair Trade Commission to heavily fine the cigarette sellers who they believe have colluded in raising the price of cigarettes. The cigarette manufacturers claim unanimously that raising their prices is a reflection of rising costs. They are powerless to control how much retailers wish to charge for their products, they say. The convenience stores, which have made an extra profit of NT$5 per pack from the “old” cigarettes, claim that with cigarettes, as with soft drinks, it is hard to demarcate precisely when they receive their goods. Thus it is difficult for them to know which cigarettes should be sold under the old pricing system, and which should be sold under the new. The new cigarette excise tax, which raises the taxes on cigarettes from NT$10 to NT$20 per pack, took effect June 1. But the fact that the three major cigarette sellers in Taiwan—the Taiwan Tobacco and Liquor Corp., with a 40 percent share of the market; Japan Tobacco Inc., with 42 percent; and Philip Morris Taiwan SA, with 9 percent—have decided to raise their prices on the same day has left consumers feeling puzzled. According to JTI, the company had been planning all along to raise the price on its cigarettes June 1, to reflect rising costs. But the final cost of cigarettes is determined by retailers, whose activities the manufacturers are powerless to control, it says. Convenience store retailers say that by convention prices are set according to the day on which products are sold. The price changes took effect on the day on which the products were delivered, and thus retailers have not been charging excessively for the cigarettes. The old and the new prices are coexisting uneasily. A soft pack of Long Life cigarettes used to cost NT$40. Consumers who bought the older cigarettes still had to pay NT$45 per pack. After the newly packaged cigarettes are released, the price will rise further to NT$55. A pack of Mild Seven sold by JTI used to cost NT$60; yesterday it rose to NT$65; with the new packaging the price becomes NT$75. Convenience store retailers say that there has been an increase in consumers who buy entire cartons of cigarettes. Starting June 1 Taiwan FamilyMart Co., Ltd,, a major convenience store chain, has added labels to old cigarette cartons so that clerks can more easily distinguish between old and new cartons. According to retailers, cigarette stocks usually last between five to eight days. But if consumers rush to stock up on the cigarette cartons, they could be gone in as soon as three days. Tseng Chun-kai, vice president of TTL, said that the last batch of old cigarettes was shipped out on May 29. The newly packaged cigarettes should be available within two weeks to one month, he added.