Thailand To Tackle Tax Avoidance On Imported Cars

1 min readUpdated Jun 5, 2015Jun 5, 20158:18 AM

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Thailand’s Government has confirmed that it is planning to change the way excise tax is calculated on imported vehicles as part of a wider plan to modernize Thailand’s excise tax system and increase tax revenues.

Somchai Poolsawasdi, Director General of the Excise Department, said recently that the upcoming changes are designed to stop importers from using understated cost, insurance, and freight (CIF) valuations to reduce excise tax payable.

Under the proposed new excise tax system, excise tax rates would be cut, but the tax would be based on the retail price of the vehicle, rather that its CIF valuation.

Plans to change the basis of excise taxes to retail prices, instead of ex-factory prices, were announced by the Excise Department last year as an addition to the military-led Government’s tax reform plans. The new excise tax calculation methodology is intended to improve transparency (as ex-factory prices could be understated by manufacturers), and bring Thailand’s excise taxes in line with global standards. The Government says that the amendment would have no effect on consumers, but will increase excise tax revenues by around THB6bn (USD178m) annually.

The new excise tax bill was approved by the Cabinet last month but must be endorsed by the Legislative Assembly before it can become law.

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What this means

Thailand's push to base excise tax on retail prices for imported cars, moving away from easily manipulated CIF valuations, is a shrewd governmental play. This aligns with a broader regional trend of governments seeking to close revenue gaps and improve transparency, as seen with various tax-related initiatives across Asia. The claim it will not affect consumers, while increasing revenue by THB6bn, suggests importers will bear the brunt. This puts significant pressure on luxury and high-value car importers, who might find their existing operational models squeezed. While the government cites transparency and global standards, the primary driver is clearly increased tax collection. The key next step for retailers is monitoring the Legislative Assembly's final endorsement.

Minjun Park

Questions & Answers

What is the primary reason for the Thai government changing how excise tax is calculated on imported cars?

The government aims to stop importers from using understated cost, insurance, and freight (CIF) valuations to reduce the amount of excise tax they have to pay. This is part of a wider plan to modernise the tax system and increase revenues.

How will the new excise tax system for imported vehicles be calculated?

Under the proposed new system, excise tax rates will be cut, but the tax itself will be based on the retail price of the vehicle. This replaces the previous method of using CIF valuation or ex-factory prices.

What financial impact does the Thai government anticipate from these changes?

The government expects an increase in excise tax revenues of approximately THB6bn (USD178m) annually once the new system is implemented. They also state it will have no effect on consumers.

What is the current status of the new excise tax bill?

The Cabinet approved the new excise tax bill last month. However, it still needs to be endorsed by the Legislative Assembly before it can officially become law and take effect.

Reader pulse

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