Luxury imports set for duty cut

Luxury imports set for duty cut

Move aims to attract big-spending tourists

A fruit vendor pushes his cart past a luxury mall near the Erawan shrine. (EPA photo)
A fruit vendor pushes his cart past a luxury mall near the Erawan shrine. (EPA photo)

The Customs Department is poised to cut the 30% import duty on luxury items in an effort to boost tourists' spending, its chief says.

The department will convene a meeting with the private sector this month to arrange the tariff reduction before forwarding it to finance permanent secretary Somchai Sujjapongse for deliberation, director-general Kulit Sombatsiri said.

The new duty level must not hurt domestic manufacturers, he said without elaborating.

The move follows frequent requests by the private sector to promote Thailand as a tourist shopping paradise while encouraging Thai consumers to shop at home instead of abroad.

The government is stimulating domestic consumption and tourist spending in a bid to boost economic momentum because public and private investment take longer to deliver results.

It offered tax breaks worth up to 15,000 baht per individual in the final seven days of last year with the aim of triggering a shopping spree.

The Finance Ministry recently estimated the festive tax breaks would add 0.1 to 0.2 percentage points to GDP this year.

That estimate assumes half the 3 million taxpayers would use the tax break, generating an extra 150 billion baht in spending.

This could boost GDP growth to 3% this year from an earlier forecast of 2.8%.

Amid weak exports, delays in public investment and anaemic consumption, the tourism industry was the bright spot for the economy in 2015.

Foreign tourist arrivals are expected to reach almost 30 million for 2015, exceeding the official target of 28.8 million despite the deadly Erawan Shrine bombing on Aug 17.

Mr Kulit said his department might allow an increase in the number of duty-free shops and collection centres to facilitate tourists.

The 10 collection centres for duty-free items are thought to be insufficient to provide services for both Thai and foreign tourists.

Yuthasak Supasorn, governor of the Tourism Authority of Thailand (TAT), said cutting the import tariff on luxury products would help to promote tourism and turn the country into a shopping paradise for foreigners.

The main groups to benefit would be from short-haul markets such as China, Hong Kong and Singapore, while European tourists would not be very interested in buying brand-name products here.

The tariff reduction is in line with the TAT's major policy of generating more tourism revenue by increasing tourists' length of stay and spending.

"We hope this measure will help to lift tourist spending on shopping by 15-20%," Mr Yuthasak added.

Jariya Chirathivat, president of the Thai Retailers Association, said foreign tourists spent 1,208 baht a day on average on shopping, two times lower than in Singapore and four times lower than in Hong Kong.

Phaibul Kanokvatanawan, chief executive of The Mall Group, said before reducing the import tariff on luxury products, the government should compare free-on-board prices to prices at sales counters in Thailand, Singapore and Hong Kong.

This would help the government to know what price Thailand should set for luxury products if it wanted to attract foreign tourists to shop here and compete with the two other major tourist destinations.

"If our import tax on luxury products in Thailand is not different from Hong Kong and Singapore, Thailand will become a shopping paradise and our tourism will take the lead since the cost of living is lower while hospitality and hotel facilities are superb," Mr Phaibul said.

Prasong Poontaneat, director-general of the Revenue Department, hopes to increase the number of foreign tourists claiming value-added tax refunds to 100,000 a year from 7,000 now.

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