The taxing issue of eco-friendly cars
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The taxing issue of eco-friendly cars

Many people expect the upcoming new year to mark a new beginning but apparently 2016 will not be a good time for those who want to buy a new car as the new excise tax structure will be implemented, starting from Jan 1. The new vehicle excise tax will be based on carbon dioxide emissions, E85-gasohol compatibility and fuel efficiency which means only those who go for eco-friendly cars will not be affected by higher taxes.

There are different kinds of taxes when it comes to purchasing a vehicle -- tariff collected by customs, excise taxes collected by the Excise Department, tax collected by the Ministry of Interior and annual taxes collected by the Department of Land Transport.

With the new excise tax structure, excise tax revenue should increase by about 5 to 10 billion baht next year. However, it could be less than this if car sales do not match expectations. The plan to change the criteria of excise taxes was initiated in 2012 but a heads up was given to manufacturers.

This was done so they could improve the quality of their vehicles before the time actually came. To be environmentally friendly is basically what this new tax structure is aiming for.

The new excise tax structure comes with an "eco-stickers" policy where it is mandatory for new cars to carry information about the vehicle's international standard, car efficiency as well as fuel consumption rate. This is designed to ease the consumer's decision making.

Every new car must also be certified by the Thai Industrial Standards Institute (TISI) and the excise rate will be specified by the Excise Department.

The excise tax for passenger cars with CO2 emissions of 150 grammes per kilometre or below will be 30%, 150-200g will be 35% and more than 200g will be 40% while cars with E85-gasohol compatibility will be charged excise tax less than 5% in each carbon emission level.

Eco-cars are required to emit less than 100g/km, lowering their tax rate to 12-14% from 17%. 

This new structure obviously encourages manufacturers to improve their vehicles to be compatible with E85 as well as launching eco-cars for attracting customers with reasonable prices so they can retain their market share. Honda is one of the companies that has obviously adapted to the new policy as all their cars are E85-compatible, except for the Honda Brio which is an eco-car.

When it comes to consumers, the price is of course one of the main important factors but as this new tax structure would overall increase the price, chances are consumers will consider purchasing cars that emit less pollution or have an E85 option, which implicitly means that they would help decrease CO2 emissions.

This seems to be a successful plan in support of environmentally friendly practice.

However, the annual tax which is collected from the Department of Land Transport doesn't seem to conform to this new excise tax structure.

Car users have to regularly pay annual tax which is still based on engine capacity.

This tax rate is fixed for the first five years. After that, the 10% tax will be decreased each year until the 10th year, when it will stay the same. The way annual tax keeps decreasing actually encourages people to use older cars.

However, the fact that the efficiency of older cars usually decreases with time, with engine deterioration, these old cars actually tend to emit more CO2 than the newer ones. In Thailand, there is a regulation that there are to be mandatory inspections every year for cars that have been used for over seven years. But the price people pay for it is quite cheap, alongside the decreasing prices of annual tax.

It has also been questioned whether the quality of car inspections is good enough as cars that emit black smog are still allowed on the roads and accidents caused by faulty cars are often seen on the streets.

In Japan, people are allowed to use old cars but their mandatory car inspection process is very strict.

People also have to pay a lot of money for the check-up.

This is a good incentive for them to use new cars rather than old ones. Japan is an automotive industry country, unlike Thailand.

So using old cars is a reasonable choice in our country.

But if our policies on owning vehicles are centred around the fact that they are environmentally friendly, it is necessary to be consistent, launching a policy that is geared towards pushing older cars off the streets.

For example, annual tax should also be based on CO2 emissions and car check-ups should be more strict.

It would also be great if we could see that the extra revenue earned from these higher excise taxes is spent on improving the environment.

Pattramon Sukprasert is a feature writer of the Life section of the Bangkok Post.

Pattramon Sukprasert

Feature writer

Pattramon Sukprasert is a feature writer for Life section of the Bangkok Post.

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