Some merchants are exploiting the online distribution channel to avoid tax payment even though they have physical shops, says a source at the Revenue Department.
These merchants may offer discounts to attract customers to buy online because they can share the profits from sales at their outlets with department stores where their shops are located, as online sales transactions are difficult for the tax-collecting agency to track, the source said.
Some department stores share up to 40% of the profits from the sale of goods and services.
As online shopping gains in popularity, a number of shoppers are visiting brick-and-mortar outlets to try out apparel or shoes, or look at items in person before buying them online.
Online shopping is biting into the Revenue Department's tax income, the source said.
The department estimates that there are 500,000 online vendors making transactions in the country, of which 350,000 are local and the remainder have no presence in Thailand. The department reckons that online purchases total trillions of baht.
The Finance Ministry is pushing a draft bill on an e-business tax, a levy on online purchases, advertisements and website rent in Thailand earned by operators with a presence outside of the country.
The draft will require online platform operators with a foreign presence to remit value-added tax (VAT) from transactions occurring in Thailand to the Revenue Department through an electronic payment channel. They must sign up as operators under the VAT system if they earn over 1.8 million baht a year from online trade in Thailand.
The e-business tax will level the playing field for digital platform service providers located in Thailand, as their transactions are now subject to VAT if they earn annual revenue exceeding 1.8 million baht from online service. Those with an overseas presence and earning income from advertising and website space rental from Thailand are also subject to a 15% withholding tax.
The draft bill, which will soon be forwarded to the cabinet, will authorise the Revenue Department to revoke the VAT exemption for online shopping of goods worth less than 1,500 baht purchased from foreign vendors outside of Thailand and shipped by mail. The move is intended to pave the way for the department to tax all online purchases.
Purchases from foreign e-commerce vendors outside of Thailand are now liable for the 7% VAT only if the value exceeds 1,500 baht, but many online operators exploit the loophole by breaking up invoices into amounts below the threshold to skirt the levy.
The Finance Ministry expects the law to come into effect this year.
During the recent second public hearing on the draft bill, it was suggested that digital platform service providers which fail to remit payment or only pay a portion of the VAT should be subject to fines.