Download Optimal Excise Tax: Are they viable for Thailand

TAX INCENTIVES: Thailand’s experience
IMF Tax Policy Seminar for Asian and
Pacific Countries on Tax incentives
Tokyo, June 9th, 2009
Financed by JSA
Lawan Puwan
Director of Tax Policy Bureau
Fiscal Policy Office, Ministry of Finance
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Presentation Outline
• Thai Tax System
• Tax Incentives in Thailand
• Thailand’s Recent Economic Situation
• Economic Stimulus Measures & Impacts
• Conclusion
Fiscal Policy Office
2
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Thai Tax System
3
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Development of Thai Tax system
 Various types of taxes, tax bases and tax
rates.
 Rely on indirect taxes.
 Direct taxes becomes more important.
 Declining trend of import duties.
 Emphasize more on domestic taxes.
4
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax Structure
 Taxes collected by National Authorities
 Income Taxes & Value Added Tax (VAT) & Specific
business taxes collected by Revenue Department
 Excise Tax collected by Excise Department
 Custom duties collected by Customs Department
 Taxes collected by Local Authorities
 Land and Housing Tax, Land Development Tax
Signboard Tax, Slaughter Tax, Swallow Bird’s nest
Duty, Petrol Stations Tax, Hotel Tax and Retail
Tobacco Tax
5
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
• Income Tax
 Personal Income Tax : PIT
 Tax Base : net income earned during 1 yr. after deduction of
expenses and allowances.
 Tax rate : Progressive Rate from 10 to 37 %
 Corporate Income Tax : CIT
 Tax base and Tax rate
Tax Base
Net Profit after deductible
expenses
Income before expense
Profit disposed out of Thailand
Fiscal Policy Office
Tax Rate
30% *
3 - 10%
(depend on income type)
10%
6
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
• Value Added Tax (VAT)
 VAT in Thailand was introduced in Jan. 1, 1992
 Tax base and Tax rate
 A consumption type with full tax credit and invoice base
Type
reduce from 10%
to 7% until Sept
30, 2007
- General goods and services
- Exported goods and services
- Small entrepreneurs with annual sale amount
less than 1.8 mil. Baht
- Some goods and services i.e. Unprocessed
agricultural products, Domestic transportation and
Amateur sports etc.
Fiscal Policy Office
Rate
(%)
10 *
0
Exempt
7
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
• Specific Business Tax (SBT)
 Basic Concept
 Imposed on various commodities and services;
Banking /similar business, finance, credit
fancier, securities business, insurance, pawn
brokerage, real estate business and sale of
securities in the SET
 Impose at flat rate from 2.5%-3.0% excluding
10% local tax on top
 Excluded from the VAT system
8
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Excise Tax
 A selective / single stage sales tax
 Roles of excise: In line with conventional objectives
of the excise
 20 categories of goods and services are subject to tax
 Petroleum, Automobile, Tobacco, and Alcohol
generating > 75% of excise tax revenue
 Tax base : ex-factory price (domestic products) and
CIF + Import duties (Imported products)
 Tax rate: specific or ad-valorem rate
9
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Customs Duties
 An indirect tax levied on both imported and
selected exports
 Classification of imports based on the
harmonized commodity description and coding
system
 Duties are levied on a specific or an
ad-valorem basis, whichever is higher
 Tax Base : the CIF Value
 Customs tariffs at present ranged between
0% - 80%, the highest rate being for passenger
cars
10
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax Incentives in Thailand
11
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax Incentives in Thailand
 Tax incentives for investment
 Tax incentives for export promotion
 Tax incentives for social welfare
 Tax incentives for promoting renewable
energy
etc.
12
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax Incentives for investment promotion
 Restructuring the import duties classified by value escalation:
 Under the Investment Promotion Act of 1977, the Board of Investment
is authorized to grant incentives and privileges to qualified investments.
- Investment promotion zones used to support government goals.
- The BOI offer 2 kinds of incentives to promoted projects.
 Tax incentives: exemption/reduction of import duties on machinery and
raw materials
: exemption of CIT (3-8 years)
 Non-tax incentives : permission to bring in foreign workers
: own land and take or remit foreign currency abroad.
13
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
3 Zones
Tax Policy Bureau
Types of the priority projects
1. Agriculture & agricultural products
2. Direct involvement in tech & HR
development
3. Public utilities, basic services and
infrastructure
4. Environmental protection and
conservation
5. Targeted industries
14
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax Incentives for export promotion
Measures
1. Duty Drawback
under Section 19 bis
2. Duty Compensation
Responsible
Organization
Privileges
Customs
Department
Refund of import duties
Fiscal Policy Office
& Customs
Department
Refund of import duties
3. Manufacturing
Bonded Warehouse
Customs Department
Exempt import duties
4. Custom Free Zone
Customs Department
Exempt import duties
15
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax Incentives for export promotion
Measures
5. Industrial Free Zone
(IFZ)
6. Duty Exemption
under Investment
Promotion Act
Responsible
Organization
Privileges
Industrial Estate
Authority
Exempt import duties
Office of the Board
of Investment
Exempt import duties
16
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
EXPORT VALUE CLASSIFIED BY TAX INCENTIVES
2008
6.49%
11.92%
32.65%
21.97%
25.20%
1.78%
Export (No tax incentive)
BOI
Bonded Warehouse
Duty Compensation
Duty Drawback
> 1 incentives
Source:
Information and Communications Technology Center, Ministry of Finance
: The Customs Department, Ministry of Finance
Fiscal Policy Office
17
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Thailand’s Recent Economic Situation
18
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Global Crisis and Impacts to Thailand
1
Declining asset value &
writedown
Global
3
Thailand
Financial Institutions
Limited impact as Thai
banks have only 0.4%
related to CDOs
Unlike financial crisis in 1997,
Thai financial institutions and
corporates have stronger
balance sheet
2 Liquidity Issue
Crisis of confidence led to credit
crunch and insolvency threats
3
Lower income from contraction of
global demand and production
Limited impact in terms
of liquidity
2
Real Sector
Negative impact on our
export-driven economy
1
Ample
liquidity in
banking
Sector
Credit issues
of corporates
(particularly
SMEs)
?
• Contraction in export
• Lower capacity utilization
• Increase in unemployment
• Dampened consumer
confidence
• Low leverage ratio
• Sufficient capital base
• Low NPL ratio
Banks are reluctant to lend
Capital & Liquidity to Support
Recovery
Liquidity Problem &
Lower Investment
Lower Consumption
Overclouded by political
crisis
19
Note: (1) Thai banks have only 1.2% of total assets exposed to foreign assets
(2) ExportPolicy
accounts for 72%Office
of total GDP
Fiscal
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Real GDP Q4/2008 Contracted -4.3 % yoy
Real GDP (% yoy)
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
6.3
5.3
5.7 6.0 5.3
5.1
4.5 4.3 4.4 4.4
3.9
2006 5.2%
2007 4.9%
2008 2.6%
-4.3
Q1
Q2
Q3
2006
Q4
Q1
Q2
Q3
2007
Q4
Q1
Q2
Q3
Q4
2008
.
Source : National Economic and Social Development Board
Fiscal Policy Office
20
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Thailand’s Economic Indicators : Private Consumption
Growth rate : %YOY
(Share of GDP)
Real private consumption(51.8%)
2007
2008
2008
2009
Q1
Q2
Q3
Q4
Dec
Jan
1.6
2.5
2.7
2.5
2.7
2.2
-
3.6
9.1
11.5
9.4
16.1
40.1
-3.4
-16.2
No. of passenger car sales
-11.3
32.7
39.1
24.8
22.3
47.5
98.2
-10.0
Motorcycle sales
-16.8
7.9
1.5
6.2
16.2
8.0
14.1
-21.6
Agricultural Price
1.2
25.1
18.2
38.2
35.5
9.1
5.0
0.2
Import of consumer goods (value)
24.6
26.7
37.7
37.4
35.8
1.4
-2.5
-17.9
Import of consumer goods (volume)
20.3
20.1
29.7
28.4
29.8
-2.5
-5.9
-20.4
Consumer confidence index
71.0
70.7
72.5
71.9
70.6
67.7
67.5
68.3
Private consumption indicator
Real value added tax
Note: Real VAT (Feb 09): -24.2% YOY;
CCI (Feb 09): 67.2
Source : Compiled by FPO
Fiscal Policy Office
21
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Thailand’s Economic Indicators : Private Investment
Growth rate : %YOY
(Share of GDP)
2007
2009
2008
Q1
Q2
Q3
Q4
Dec
Jan
0.6
3.2
6.5
4.3
3.5
-1.3
-
1.6
4.2
8.3
5.2
5.4
-1.4
-
-2.7
-0.2
0.4
1.3
-1.9
-0.7
-
Import of capital goods (volume)
-1.2
12.9
31.3
9.8
13.1
0.6
-7.0
-29.8
Import of capital goods (volume) excluding
special items*
1.1
11.4
20.0
16.5
12.5
4.5
3.0
-19.9
-6.0
-15.8
7.7
-5.6
-25.8
-32.7
-32.8
-39.5
Real estate tax collection**
0.8
-1.1
-3.9
29.3
22.2
-4.1
-16.9
0.8
Domestic cement sales
-5.0
-10.3
-5.9
-5.3
-16.5
-13.9
-2.1
-11.9
Real private investment
(16.6%)
2008
 Private investment in machinery
(12.8%)
 Private investment in construction (3.7%)
Private investment indicator
Commercial car sales
Note: * Special items such as airplane, ship, train; ** Adjusted for temporary tax rate reduction to 0.1%
Source : Compiled by FPO
Real Estate Tax Collection (Feb 09): -13.2% YOY
Fiscal Policy Office
22
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Thailand’s Economic Indicators : Fiscal sector
Unit
(billion Baht)
2008
2007
2009
2008
Q1
Q2
Q3
Q4
Dec
Jan
Feb
Net revenue
1,470.4
1,495.8
308.8
499.0
412.9
272.8
76.2
88.6
82.4
%y-o-y
6.9
1.7
-0.8
15.5
3.1
-16.1
-16.5
-8.6
-29.1
588.1
665.8
110.2
227.7
227.1
100.9
26.4
36.8
31.8
6.8
13.2
12.2
16.2
17.4
0.3
-6.5
6.3
-1.8
445.2
501.7
124.5
127.4
133.9
115.9
36.8
36.1
30.1
4.9
12.7
15.7
15.8
21.8
-1.5
-6.9
-18.3
-25.2
1,668.1
1,644.4
402.2
424.6
413.3
404.3
145.4
192.4
179.7
25.1
-0.3
-8.0
1.8
-1.6
2.8
31.2
21.5
53.3
1,273.2
1,296.1
292.3
320.6
348.9
334.3
118.4
126.0
132.6
27.4
3.3
-8.3
1.9
3.6
10.3
34.2
34.1
35.4
297.7
240.9
76.8
86.5
49.5
28.1
9.5
52.0
33.9
%y-o-y
37.7
-19.1
-12.3
-0.2
-28.0
-48.7
-2.0
-1.8
217.8
- Carry over
97.2
107.5
33.1
17.5
14.9
42.0
17.6
14.4
13.1
%y-o-y
-17.0
10.7
6.7
8.4
2.1
18.8
35.1
25.5
30.8
- Income-based tax
%y-o-y
- Consumption-based tax
%y-o-y
Government expenditure(1+2)
%y-o-y
- Current expenditure
%y-o-y
- Capital expenditure
Fiscal
Fiscal Policy
Policy Office
Office
Source : Compiled by FPO
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Thailand’s Economic Indicators : Export
Growth rate : %YOY
(Share of GDP)
2007
2008
Real export (56.8%)
6.7
Value $ term (Custom Dept.)
Price $ term (Ministry of Commerce)
2008
2009
Q1
Q2
Q3
Q4
Dec
Jan
6.0
7.5
9.8
12.6
-8.9
-
-
18.6
15.6
23.1
28.1
26.1
-10.6
-14.6
-26.5
5.7
10.5
9.9
12.5
15.0
4.6
1.7
0.9
12.2
4.4
12.0
13.9
9.7
-14.6
-16.0
-27.1
14.9
0.7
10.0
12.6
6.2
-21.8
-34.6
-40.4
9.7
-2.0
7.3
13.4
0.1
-24.3
-36.8
-42.1
15.6
6.1
14.2
14.3
16.1
-17.3
-20.7
-29.5
13.5
1.7
10.2
9.5
10.4
-20.6
-23.5
-30.7
32.5
21.3
34.3
31.0
35.7
-10.4
-20.7
-34.5
volume $ term
20.9
15.4
27.2
25.0
28.3
-14.2
-23.7
-37.1
Agro industry sector(6.6%)
19.1
23.4
14.4
27.8
38.2
13.6
9.7
-7.5
volume $ term
16.5
7.7
-1.9
7.4
19.1
6.2
8.0
-8.2
 Agricultural sector (11.3%)
15.5
32.8
39.9
56.7
57.5
-11.5
-27.9
-33.4
volume $ term
5.7
0.2
14.3
7.5
3.4
-19.2
-27.1
-34.5
8.9
61.0
87.9
96.6
95.1
-7.7
-15.3
-45.1
-2.3
23.4
32.6
30.1
27.2
11.4
26.1
-19.1
Volume $ term (FPO)
Main export goods (share of total export in 2008)
Electronic goods(17.5%)
volume $ term
 Electrical appliances (10.1%)
volume $ term
Vehicles (11.0%)


 Fuel
(6.8%)
volume $ term
Fiscal Policy Office
Source : Compiled by FPO
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Thailand’s Economic Indicator : Import
Growth rate : %YOY
(Share of GDP)
2007
2008
Real import (45.6%)
2.2
2008
2009
Q1
Q2
Q3
Q4
Dec
Jan
6.9
10.0
5.4
12.5
0.1
-
-
8.7
27.6
38.0
29.
3
39.9
6.1
-6.5
-37.6
5.3
12.6
15.6
17.7
16.0
2.1
-2.3
-3.5
3.2
13.1
19.3
9.8
20.5
3.7
-4.3
-35.3
14.8
29.3
29.4
30.
1
48.3
9.4
-15.2
-41.9
8.1
16.7
17.4
15.7
31.2
2.6
-18.8
-43.4
0.9
18.0
37.6
16.
2
18.4
3.5
-4.9
-29.5
volume $ term
-1.1
12.9
31.3
9.8
13.1
0.6
-7.0
-29.8
Consumer goods(8.3%)
24.7
26.7
37.7
37.4
35.8
1.4
-2.5
-17.9
20.3
20.1
29.7
28.
4
29.8
-2.5
-5.9
-20.4
2.2
43.9
68.4
50.
2
60.4
5.9
4.0
-53.4
-5.5
10.6
13.8
-1.7
10.3
20.9
45.0
-35.4
Value $ term (Custom Dept.)
Price $ term (Ministry of Commerce)
Volume $ term (FPO)
Main import goods (share of total import in 2008)
 Raw materials(43.4%)
volume $ term
Capital and machinery(24.2%)
volume $ term
 Fuel (20.9%)
Source : Compiled by FPO
$ term
Fiscal volume
Policy
Office
25
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Economic Stimulus Measures
1. To increase welfare & support SMEs / enterprise
community
Objectives:
2. To promote real estate sector
3. To promote tourism
4. To promote debt restructuring and M&A
Measures:

Fiscal instruments:
Tax policies, government spending

Monetary instruments
26
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax incentives for social welfare
Allowances:
- Disable person
- Life insurance premium
- Long term saving
- Education
- Aging
etc.
27
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax incentives for renewable energy
 Reduce the excise tax rate:
- Gasohol with ethanol content not less than 10%, 20%, and 85%
- Bio-diesel
- Passenger /public transport vehicles (< 10 seats):
- E20, E85, and NGV
- Hybrid Electric Vehicles
- Electric Powered Vehicles
- Fuel Cell Powered Vehicles
- Eco car
28
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Tax incentives for renewable energy (cont.)
 Reduce import duties:
- NGV equipments and engines
- CKD Chassis with Engine and Chassis with Engine for transport cars
Deduct 125% of PIT and CIT for purchase of energy saving equipment
29
Fiscal Policy Office
Ministry of Finance,
Fiscal Policy Office
Tax Policy Bureau
Conclusion
Fiscal Policy Office