Ministry of Finance: Update on Excise Tax in the Fields of Public Health, Environmental and Economic

Ministry of Finance: Update on Excise Tax in the Fields of Public Health, Environmental and Economic

On November 5, 2024, the Deputy Minister of Finance presented key policies to the Excise Department, emphasizing its crucial role in driving the transformation of the country’s economic structure, environmental sustainability, and public health. This will involve in studying new tax collection mechanisms, continuing the existing mechanisms, and adjusting the tax collection system to achieve such goals. The policy primarily focused on 3 key areas – health-related tax, environmental-related tax, and economic-related tax. The details are as follow:

1.Heath-Related Tax

• Fat Tax Consideration: The Excise Department was advised to consider taxation mechanism for the fat tax to combat rising rates of fat consumption which are linked to increase a burden healthcare cost. The fat tax will be collected based on the type of fat in foods and products.
• Expanding the Scope of Sodium Tax: Thailand’s current sodium tax will mainly target at four main product groups (i.e., instant noodles, frozen foods, snacks, and sauces). The policy is suggested to impose a sodium tax on products outside the current controlled lists, and prioritizing items with high sodium levels while considering the accessibility of essential goods for low-income individuals which will be calculated based on the level of saltiness.
• Approving of the 4^th Phase on the Sugar Tax: The sugar tax was implemented to encourage beverage manufacturers to reduce sugar content in 2017, in order to provide businesses and consumers time for adapting to the potential increases of the price, the sugar tax will be implemented into 4 phases which step-up system with rates increasing every 2 years. The implementation of sugar tax is currently in the 3^rd phase, and the sugar tax has been approved for the 4^th phase, commencing on April 1, 2025. This progressive approach aims to achieve the goal of reducing sugar content in packaged beverages.
• Tobacco Tax System Development: Thailand’s tobacco tax structure consists of 2 main types: (1) a blended tax which considering both value and quantity, and (2) a single-rate tax which specific rate taxes, The policy requires the implementation of a blended tax system for tobacco product while stipulating the development of a single-rate tax system that aims to reduce price distortions, boost market competition, support local tobacco farmers, and increase government revenue.
• Track & Trace system for Tobacco Products: Previously, Thailand’s tobacco verification system relied solely on stamps to confirm tax payment, with information accessible only to the Excise Department and manufacturers. To enhance transparency and traceability, a QR code tracking system has been implemented and enforced. This new system facilitates the process of verification, including allows the public to independently monitor product authenticity.

2. Environmental-Related Tax

• Establishment of Carbon Pricing Mechanism: The Excise Department was advised to establish a carbon pricing mechanism in the excise tax on 6 different types of oil products to reduce the emission of Carbon dioxide gas from both the public and business operators. The initial carbon price is set at 200 baht per ton of carbon.
• Reconsideration of Tax Rate for Battery Products: Currently, the tax rate for battery products is set to be at the rate of 8% for all types of batteries according to Ministerial Regulation regarding the Excise Tax Tariff Rates B.E.2560 (2017). However, the tax rate will be changed into a tiered tax system considering the characteristics of the batteries such as life cycle, weight, types, and energy used.

3. Economic-Related Tax

• Investment Incentive for Automobile Industry: The policy using tax incentives to attract investment in the domestic automotive industry, particularly for Plug-in Hybrid Electric Vehicle (PHEV), Battery Electric Vehicle (BEV), Fuel Cell Vehicle (FCEV) vehicles, and Hybrid Electric Vehicle (HEV) while maintaining the production base for Internal Combustion Engine (ICE). However, to support long-term restructuring, the policy will be exposed to short-term revenue losses.

 Strategic Objectives:

1. Promote preventive healthcare
2. Modify consumer behavior
3. Support environmental sustainability
4. Drive economic transformation
5. Ensure balanced revenue collection

Implementation Considerations:

• The phased approach to allow business adaptation
• Targeted reduction of sodium consumption by 30% by 2025
• Collaborative approach with relevant government agencies

Conclusion

The November 2024 excise tax policy update represents a sophisticated, multi-dimensional approach to addressing national challenges through strategic tax mechanisms, balancing public health, environmental sustainability, and economic development.

Recommended Actions for Stakeholders:

• Invest in product reformulation
• Review current product portfolios
• Assess potential tax implications
• Develop adaptation strategies
• Engage with regulatory authorities

Author: Panisa Suwanmatajarn, Managing Partner.

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