E-commerce tax aims to create level playing field
The Revenue Department is gearing up to amend a tax law to include e-commerce, aiming to create fair competition among foreigners and local e-business operators, as well as save billions of baht in forgone tax revenue.
The second public hearing is expected to be held in January. Foreign digital service operators and over-the-top (OTT) operators need to deduct value-added tax (VAT) delivered to the Revenue Department if the buyers are in Thailand.
The Thai E-Commerce Association has urged the government to create regulations for fair competition and apply anti-dumping laws to e-commerce businesses to avoid a market dominated by Chinese internet giants who control retail, logistics and payment services, similar to Amazon.com in the US market.
"The Revenue Department will emphasise fair competition among traditional and online businesses," Patricia Mongkhonvanit, deputy director-general, said on a panel at Thailand E-commerce Week 2017. "We will not issue any special law for e-commerce or endorse any tax rate for online business, as we need to treat everyone equally."
The department already held the first public hearing to amend the tax law, covering overseas operators who earn revenue from digital service transactions in Thailand, such as digital marketing, advertising and music, and software application downloads.
"Those foreign operators need to include the 7% VAT, which they must deliver to the Revenue Department," Mrs Patricia said. "This model already functions in India and other countries."
She said the amendment will also apply to imported products, as any items priced below 1,500 baht will need to pay VAT, but this proposal was disputed at the public hearing. Under the present Customs Law and Tax Act, imported items priced below 1,500 baht are not levied a tax.
"We see a lot of Chinese imports sell online in Thailand, helping them to avoid taxes, which gives them a price advantage over local products," Mrs Patricia said.
Surangkana Wayuthparb, executive director of the Electronic Transactions Development Agency, said tax avoidance in digital services, especially digital marketing, often comes from social media platforms, and Britain and Indonesia have already passed regulations to deal with the issue.
Pawoot Pongvitayapanu, president of the Thai E-Commerce Association, said the parade of global e-commerce operators like Alibaba and JD.com should lift Thailand's e-commerce market in the short term, with billions of baht in investment and lower-priced products.
But in the long run it will create dominant players, similar to the US retail market dominated by Amazon.com, he said.
"Chinese players will dominate in every aspect of logistics, payment and retail," Mr Pawoot said.
Local marketplaces need to find niches or verticals to compete with giant players in a horizontal e-marketplace, he said. In some countries, like Japan and Taiwan, as well as with the example of Tokopedia in Indonesia, local marketplaces have been bolstered to compete with foreign operators.