The Excise Department has expressed concern about the impact on local manufacturers of greater competition from imports as taxes and tariffs decline.
Somchai Pulsawas, the excise director-general, said the advent of the Asean Economic Community in 2016 will aid cross-border trade across the region, with import tariffs for many categories dropping to zero for products made in Southeast Asia.
This in turn will have an impact on the excise tax collected on imported products, which is calculated based on CIF (cost, insurance and freight) valuations.
Excise tax is now collected on a range of products, including cigarettes, beer, cars and electric appliances.
For domestic goods, excise tax is calculated based on the ex-factory price, or the cost of production plus a profit margin for the manufacturer.
Excise tax on imports is calculated based on the CIF price plus import tax and value-added tax.
Mr Somchai said certain imports may have a price advantage over local producers with the decline in import tariffs and resulting excise tax calculations.
The Excise Department wants to adjust its tax calculation methodology and move away from the two-tiered system now used for domestic manufacturers and imports.
Instead, the department would shift to retail prices as the base in calculating excise tax for both imports and local manufacturers, a move that should simplify tax calculations and avoid disputes between tax officials and producers in how they set pricing strategies.
Of course, using retail prices as the base for calculation would probably result in higher tax charges for all producers, given that retail prices are inevitably higher than either ex-factory prices or CIF valuations.
Mr Somchai maintained that the tax change would be neutral for existing parties, with no additional burden placed on the private sector.
About the author
- Writer: Wichit Chantanusornsiri
Position: Business Reporter