Government revenue from liquor taxes
- Published: 1/08/2011 at 03:11 PM
- Online news:
Liquor taxes are a promising revenue source for future government spending. Tax increases on white spirits could reduce rural health problems and costs.
Also check out another recent article on the liquor industry: Liquor industry: One family control (28/06/2011).
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Review of liquor taxes urged, Health and revenue benefits stressed by Parista Yuthamanop
Governments looking for ways to raise revenue rarely hesitate to increase "sin taxes", with alcohol and tobacco at the top of the list. But the way Thailand taxes alcoholic drinks needs to be reformed, say researchers.
Higher excise taxes on liquor would be a start, and the funds could be used to improve health-care services and education facilities, they say.
The overdue revision of the alcohol tax system would increase the prices of whisky and white spirits, reducing overall health problems, especially among the poor, researchers found.
The need for reform has been further underscored by reports last week that Diageo, a multinational liquor company, paid $600,000 in kickbacks to an unnamed Thai official between 2004 and 2008 to lobby for more favourable tax treatment for its products.
Tax disputes between alcoholic beverage producers and governments are commonplace. The current tax regime in Thailand is a mixed system that charges excise taxes based on both liquor volume and alcohol content, whichever yields higher revenues. But in practice, the tax rate has been the one based on volume.
As a result, the system allows white spirits to be sold at a lower price than beer, therefore promoting potentially harmful drinking habits. The conclusion appears in a study by Pongsak Hoontrakul, a researcher with the Sasin Graduate Institute of Business Administration; Bunchorn Songsamphun, an economist with the Excise Department; and Santi Chaisrisawatsuk, an economist with the National Institute of Development Administration.
They found that beer generated 62% of total alcoholic beverage taxes or 58.74 billion baht in 2009, while the revenue from white spirits was 17% or 16 billion baht and from and whisky just 3% or 2.6 billion baht.
Dr Bunchorn said the current system also created an environment in which existing and new distillers marketed high-degree alcohol with cheaper prices, to maximise market share amid heated competition.
He said that a "synthetic volume-based" system would help make liquor with higher alcohol subject to higher tax.
Assuming that the tax rate on white spirits increased to 20 baht from 5.60 baht per litre under the proposed system, Dr Banchorn said excise tax income could increase by around 40 billion baht.
The researchers said a 1% increase in price could reduce beer consumption by 3% in the country. For whisky consumption, a 1% increase in price could reduce demand by 1.6%.
In 2010, Thais consumed 260 million litres of alcohol, 75% of which was contained in beer, white spirits and whisky. According to the Excise Department, the country ranks fifth in the world in terms of alcoholic beverage consumption due to low production costs and prices for white spirits, the most popular alcoholic beverage in rural areas.
Sungsidh Piriyarangsan, the director of Chandrakasem Rajabhat University's PhD Programme in Good Governance, said that another group of economists made a similar proposal to reform alcohol taxes four years ago.
They proposed gradual increases in liquor taxes each year.
They found that excise taxes would increase by 70 billion to 100 billion baht if rates were on par with international standards. Of the total, 22 billion baht would be derived from beer from a 1.5 times increase in tax income, based on an average of 41.5 baht per litre; and 40-60 billion baht from whisky, assuming a tax rate of 160 baht per litre or an increase of 2-4 times
(Source: Bangkok Post, Review of liquor taxes urged, Health and revenue benefits stressed, 1/08/2011, Parista Yuthamanop, link)
Liquor Industry Vocabulary
alcohol (noun) - alcoholic beverages, drinks that make people drunk such as whisky, beer or wine (See Wikipedia)
alcoholic (adjective) - drinks containing alcohol
alcoholic (noun) - a person who cannot stop drinking large amounts of alcohol when it is making them ill and sick (a disease) (See Wikipedia)
spirit - a strong alcoholic drink เหล้าที่มีแอลกอฮอล์แรง
white-spirit - the traditional very strong rice whisky brewed by farmers in Thailand and Laos เหล้าข้าว
beverage - a drink of any type (for example: milk, fruit juice, beer, whisky) เครื่องดื่ม
alcoholic drinks - drinks with alcohol in them (whisky, beer,
alcoholic beverages - same as "alcoholic drinks"
distillation - purifying a liquid by a process of heating it, cooling it and condensing its vapors: "Distillation is a method of separating mixtures based on differences in their volatilities in a boiling liquid mixture. Distillation is a unit operation, or a physical separation process, and not a chemical reaction" (See Wikipedia and Google Definitions)
liquor distillation - creating liquor through the distillation of fermented grain, fruit or vegetables (See Wikipedia)
distiller - a person or company that uses liquor distillation to produce a liquor product
liquor - strong drinks with high amounts of alcohol (such as whisky, vodka, gin, etc; not beer)
liquor industry - all the companies in the country that produce drink products with high amounts of alcohol in them
liquor tax - tax paid to the government on liquor products bought in stores
sin - an action, thought, or way of behaving that is wrong according to religious laws บาป
sin taxes - taxes paid to the government for activities and goods considered "sins" traditionally (drinking alcohol, smoking cigarettes, playing cards, etc)
volume - the quantity or amount of something
liquor volume - the amount of alcohol (1 liter, 2 liters, 3 liters, etc)
content - what is inside; the things inside
alcohol content - the percentage of alcohol in the alcoholic drink
high-degree alcohol - alcoholic beverages with a lot of alcohol in them (easy to get drunk)
reform - 1. improve government operations; 2. make changes to a system to correct a situation that is wrong or unfair การแก้ไข การปฏิรูป
reform alcohol taxes -
review - look at some activity or project closely (evaluate, assess) and decide to accept, change or eliminate it
policy review - look at a policy and decide to accept, change or eliminate it
urged - requested them to do, begged them to do, advised someone very strongly about what action should be taken วิงวอน
benefits - goods things that can happen from anm activity ผลประโยชน์
stressed - nervous and anxious about what will happen (in the future, for example)
rarely - not happening often นานๆ ครั้ง, ไม่บ่อย
hesitate - to pause before you do or say something, often because you are uncertain or nervous about it ลังเล
excise taxes - taxes on some types of goods produced and used within the own country ภาษีสำหรับสินค้าในประเทศ
funds - money available to spend on something เงินทุน
improve - to make better ทำให้ดีขึ้น
facilities - the buildings, equipment and services provided for a particular purpose สิ่งอำนวยความสะดวก
revision - a change, improvement or addition that someone makes to something like a plan or document การปรับปรุงใหม่, การแก้ไขใหม่
underscored - importance made known (example: the tragic nature of the tsunami was underscored by the thousands of people who died)
multinational - a large company that operates in more than one country
kickbacks - money paid illegally to a person who has helped you; 1. a secret payment made to receive an illegal favour, 2. a seller pays money to a buyer in a company or government so that the purchase will be made with him
more favourable tax treatment - pay less taxes than 1. in the past or 2. less taxes than other countries
commonplace - common; happens often, so not unusual
current - of the present time ปัจจุบัน
tax regime - tax system
charge (noun) - a payment that has to be made for something เงินที่เรียกเก็บ
yields - produces a quantity of product ให้ผลผลิต
revenues - the money that a company makes from selling its product รายรับ รายได้
practice - a way of doing something การปฏิบัติ
in practice - the way that people really do something
potentially - may happen; possible in the future ที่อาจเกิดขึ้นได้
conclusion - something that you decide is true after consider all the evidence and thinking about it carefully การสรุป,บทสรุป
generated - created
environment - business environment
market share - the percentage that one company has, of total customers in a market (example: the company sacrificed profits in the short-term to gain market share)
maximise market share - make market share as high as possible (get highest percentage of customers in a market as possible)
compete (verb) - when a group of people or organizations try hard to get something that not all can have (scare and limited resource) แข่งขัน
competition (noun) - the activity of competing with others for scarce reseources
heated - intense
heated competition - when people in a group are competing very hard (making intense efforts) to be the one to get some scarce resource (in business: customers)
amid heated competition - during intense competition
"synthetic volume-based" system
X subject to Y - X must do Y (example: alcohol is subject to a tax = alcohol must have a tax paid on it)
proposed - suggested (but not yet chosen or decided upon)
income - money that people receive from work or some other source, used for household consumption and savings
excise tax - taxes made by a government on some types of goods produced and used within their own country ภาษีสำหรับสินค้าในประเทศ
excise tax income - money that the government gets from collecting tax collected on goods sold (example: tax on alcohol)
Excise Department - the government agency that collects excise taxes
consumption - using, eating or drinking something การบริโภค
demand - the need and desire to buy goods and services by households and businesses
X contains Y and Z - X has Y and Z inside it; Y and Z are ingredients of X
rural areas - connected with the countryside outside big towns and cities ในชนบท, บ้านนอก
Good Governance - the study of how to run national governments, local governments as well as corporations and NGOs better and more effectively (See Wikipedia)
proposal - a plan or suggestion for a group to consider ข้อเสนอ
gradual - moving slowly
gradual increases in taxes - slow steady increases in taxes over a period of time
on par with - at the same level or standard
standards - an acceptable level of quality or achievement มาตรฐาน
international standards - high levels of quality and achievement acceptable to all countries around the world
About the author
- Writer: Jon Fernquest
Position: Assistent Manager Educational services