New alcohol tax structure 'unfair'
Last wholesale price used in new formula
- Published: 5/09/2013 at 12:55 AM
- Online news:
Business operators have slammed the new alcohol excise tax structure as unfair, saying the rates of some categories remain far lower than others despite the same levels of alcohol content.
But Somchai Pulsawas, director-general of the Excise Department, said the new rates are meant to increase the competitiveness of local producers against importers.
The new rates, which took effect after the cabinet approved them Wednesday, are based on a new calculation method.
The new structure uses the last wholesale price excluding value-added tax (VAT) instead of ex-factory prices used in the old formula.
Mr Somchai pointed out the change will make the competition between local and imported products fairer in terms of prices.
Previously, imported beverages were taxed based on costs, insurance and freight (CIF) but in reality they were declared lower than the actual CIF costs to keep the tax rate at a minimum.
This enabled imported beverages to compete effectively with local products.
But since the new rates are derived from the last wholesale prices after VAT, all operators have to declare the real prices before the products are distributed.
Mr Somchai said that even though imported alcohol beverages account for only 10% of the 130 billion baht in annual revenue collected by the department from alcoholic drinks, the government foresaw the potential of further entry of imported products in line with increasing market liberalisation.
Sudhabodi Sattabusya, a senior vice-president of Boonrawd Brewery, the producer of Singha products, said the new calculation is unfair because even though the producers pay the excise tax, the wholesalers set the prices used in the calculation.
"We have no idea how well a wholesaler manages his costs. If he's not very good at it, we'll have to pay more based on whatever he quotes. That way, how can our products be more competitive in the market?" said Mr Sudhabodi.
An executive from a beer company said even though authorities meant well, the tax structure came out unfair.
For example, the excise tax for beer is 48%, based on the value (ad-valorem) calculation, while the tax rate for white spirits is only 4%. Both of them are in similar tax brackets in terms of alcohol content per litre (155 and 145 baht per litre).
"My question is why white spirits pay only 4% excise tax. I think the public knows the high alcohol content in white spirits may have caused many road accidents. We should not protect its producers," he said.
Thai Beverage is the country's largest white spirit producer.
The new structure of alcohol tax is calculated on three elements: value or price, alcohol content and volume.
For white spirits, the value-based rate is 4% from 50% earlier, while the alcohol-content ceiling is set at 400 baht for each litre of 100% alcohol. But the actual tax for now is 145 baht per litre plus 3 baht per degree per litre for alcohol content above 40 degrees.
The maximum value tax for beer will be maintained at 48% of the last wholesale price, but the effective tax rate per litre of 100% alcohol content rose to 300 baht from 100 baht and the actual collected rate is at 155 baht per litre.
If alcohol content of a certain beer is higher than seven degrees, a three-baht surcharge is imposed on each degree above the level.
For wine, the maximum tax at 60% or 100 baht a litre of 100% alcohol is maintained, but products valued above 600 baht a bottle will be taxed at 36% of the last wholesale price. For products priced less than 600 baht per bottle, the tax will be exempted.
By alcohol content, tax is 1,000 baht per litre of pure alcohol, up from 100 baht. Also, if the alcohol content is above 15 degrees, it will be taxed additionally at three baht for each degree.
Under the current tax code, the Excise Department collects taxes on fermented beverages at a maximum rate of 100 baht a litre of 100% alcohol content or 60% of the product value, whichever is higher.
It collects taxes on distilled beverages with a ceiling of 400 baht per litre of 100% alcohol content or 50% of the value, whichever is higher.
Retail prices of liquor and beer are rising by 5%, 10% or 20%, depending on the value of each product, resulting in additional excise revenue of 10-15% or more than 10 billion baht. Beer prices will rise by 3-7 baht per bottle and liquor prices by 7-15%.
About the author
- Writer: Wichit Chantanusornsiri
Position: Business Reporter