The Thai cabinet has given its nod to a series of tax reductions on alcoholic beverages, with wine prices poised to see substantial drops, all in a concerted effort to stimulate the country’s tourism industry. The move comes amidst expectations that the resultant losses in excise tax revenue will be offset by increased spending from tourists.
Importantly, the steep import tariffs currently imposed on wines – which stand at 54% and 60% of declared value – are slated to be waived for a period of one year, as confirmed by government officials. Additionally, the excise tax on wine is set to decrease from 10% to 5%, while local liquor will see its excise tax rate diminish from 10% to zero, a move aimed at supporting small-scale producers, according to spokesperson Chai Wacharonke.
Furthermore, there are plans to halve the excise tax on entertainment venues to 5% of gross revenue, providing assistance to operators who continue to grapple with the lingering effects of the global pandemic. These proposed tax measures are anticipated to take effect imminently, following the publication of a ministerial regulation in the Royal Gazette, and will remain valid until the year-end, as disclosed by Mr. Chai.
Table 1. Tax Cuts on Alcoholic Beverages.
This announcement closely follows the recent extension of operating hours for entertainment venues in key tourist hubs, such as Bangkok, by an additional two hours, permitting operations until 4 am. Interior Minister Anutin Charnvirakul is deliberating on the expansion of these extended hours to other locations across the country. Notably, the anticipated loss in tax revenue will be counterbalanced by the anticipated uptick in tourist expenditures, asserted Lavaron Sangsnit, the permanent secretary of the Ministry of Finance.
In Thailand, tourism plays a pivotal role in propelling the economy, with the country having achieved its objective of hosting 28 million international tourists last year, generating 1.2 trillion baht, as per government data. Looking ahead, the nation aims to surpass the 34 million foreign arrivals mark by 2024, cited Mr. Lavaron.
During the fiscal year ending in September last year, the Excise Department amassed 177.6 billion baht in taxes from alcohol, beer, and other beverages, with contributions of 64.17 billion baht from alcoholic beverages, 86.5 billion from beer, and 26.95 billion baht from other beverages. The extant excise tax framework comprises of two tiers, where wines priced above 1,000 baht attract a 10% tax, while those below 1,000 baht are taxed at a rate of zero. Moreover, the excise tax is also linked to the volume and degree of alcohol content.
Under the current system, all wines are subjected to a tax at a rate of 1,500 baht per liter for every 100 degrees of alcohol content, a rate which has now been adjusted downwards to 1,000 baht. Concurrently, local liquor remains subject to a separate excise tax based on volume, currently levied at a rate of 150 baht per liter for 100 degrees of alcohol content, which remains unchanged.
Table 2. Thailand’s Tourism Hub Initiatives.
The Move Forward Party has been vocal in its advocacy for small-scale local brewers and distillers, contending that existing tax and regulatory measures put forth significant barriers to competition for all but a select few major industry players. The party has championed the introduction of a ‘Progressive Liquor Bill’, which seeks to alleviate some of the constraints entailed in the present legislation, potentially leading to a more dynamic and inclusive industry landscape.
The decision to slash alcohol taxes appears to be a strategic maneuver to invigorate the tourism sector and provide much-needed support to alcohol and entertainment businesses still grappling with the aftermath of the pandemic. The effectiveness of these measures and their broader impact on the economy, particularly in the context of Thailand’s ambitious tourism goals, will undoubtedly be of great interest in the coming months.