The automobile industry will face higher tax payments once the new excise tax bill, based on a different calculation, is implemented.
Excise Department director-general Somchai Poolsawasdi said the new law would use retail prices as the base for excise tax calculation as well as the cost, insurance and freight (CIF) on imported goods in order to plug loopholes used to avoid taxes.
Mr Somchai said many imported vehicles had claimed relatively low CIF compared with the retail prices of those cars. Under the new calculation, importers will be under a higher levy than current rates.
"Despite the fact that the new excise bill will set lower tax rates, the change in the calculation base should improve our excise tax revenue collection by 6 billion baht a year," he said.
"The additional revenue will come mostly from imported cars."
Mr Somchai said some vehicles in the market currently declare their CIF to be up to 20% lower than the ex-factory prices of locally made vehicles.
Furthermore, the excise chief said domestic car makers had exercised their free-zone import tariff waivers by importing parts and components and producing the cars in free zones.
Free zones are areas specified for operations with industrial and commercial purposes and other operations useful for the economy. Materials imported into them enjoy duty privileges.
The problem is free zones' import tariff is waived for export goods, but these car makers export the cars, then reimport them and declare CIF at lower than the ex-factory price of the same model that was locally made.
Apart from the automobile industry, imported cigarettes have also claimed relatively low CIF, but the retail prices are very high, so the excise on imported cigarettes will also be higher than before, in accordance with the new bill.
Liquor prices will also be affected since the bill will calculate tax based on both the retail price and the quantity of the goods, a revision from present law that allows the government to calculate based on either retail price or quantity.
The new excise tax bill, part of the government's reform roadmap, was approved by the cabinet early last month. It must pass through three readings in the National Legislative Assembly (NLA). Once it passes the final reading, it will be announced in the Royal Gazette and then take effect 180 days later.
Under the tax reform policy, Finance Minister Sommai Phasee set guidelines for ministry officials in amending rules and regulations in order to make them more up-to-date in terms of new business practices, foster greater fairness towards taxpayers, reduce the gap between rich and poor and reduce duplications and complicated tax filings inherent in present tax law.
Excise tax needs to be reformed because it has caused disputes between the government and taxpayers in many cases, while many loopholes have resulted from outdated regulations.
Mr Somchai said the amendment had been made carefully while thoroughly considering the effect on business operators and consumers.
"Some goods will see a lower tax rate, others higher tax payments, but I assure you it will be fairer for all stakeholders including the government," he said. "Given that fact, I'm confident the bill will pass NLA consideration smoothly."