The Excise Department is poised to tighten tax exemption for some beverages by raising the required level of natural ingredients from 10% to 50%.
The move could pave the way for tax levies on ready-to-drink green tea and fruit juice.
Delicious? Possibly. Healthy? Not really. Taxable? Definitely.
The department has already studied the Codex international food standards for alcohol and non-alcoholic beverages and the Food and Drug Administration's standards, according to a source with direct knowledge of the issue.
Ready-to-drink green tea and fruit juice have been granted tax exemption despite having low natural content and high sugar content, which could be harmful to health, the source said
The current rule is that a beverage can be healthy or contain local farm produce as raw materials to receive a waiver, allowing more than 100 drinks to avoid excise tax.
However, beverages that use imported concentrate for mixing at local plants are also exempt from tax.
- See also: Business demands excise tax overhaul
The Excise Department now levies 25% tax on ex-factory prices for soda and mineral water or 77 satang for 440 cubic centimetres, whichever is higher, and 20% on general beverages and fruit juices or 37 satang for 440cc.
It waives the tax for fruit drinks with at least 10% fruit juice or concentrated fruit juice.
The department has long wanted to tax ready-to-drink green tea, but manufacturers have strongly opposed it, saying their products are healthy and fall under the exemption as they have used local content that helps farmers.
The source said allowing only beverages with natural sweetness to enjoy the tax exemption could be the next step but it needs to be discussed.
Somchai Poolsawasdi, director-general of the Excise Department, said the required content of natural ingredients for beverages to be exempted from tax payments depends on Codex standards but it could be 30% or 50%.
Tan Passakornnatee, chief executive of Ichitan Group, a leading green tea producer, said it would be impossible for operators to have tea leaves as 50% of total ingredients when producing ready-to-drink green tea.
"The green tea will be too bitter to drink and no producers in the industry will produce such a green tea," he said.
The source said the Excise Department is considering details of restructuring the excise tax base to state-recommended prices from ex-factory prices for locally produced goods. It is also assessing cost, insurance and freight for imported products.
The new structure would address a lengthy dispute over the unfairness of excise duty collection. The current structure does not reflect reality.
The source said the department could also use volume on top of state-recommended prices for tax calculation for products such as cigarettes and liquor to control consumption.
However, some products with quickly changing retail prices including fuels may be taxed based on volume, the source said.
If products were taxed at a higher rate after the restructuring, the department would consider reducing tax on these products to prevent manufacturers passing on the burden to consumers.
The excise tax base change is among the interim government's tax priorities. Others are inheritance and gift tax and land and buildings tax.