3-4-2024 (BANGKOK) The Thai government, following a directive from Prime Minister Srettha Thavisin, is preparing to implement a 7% value-added tax (VAT) on imported goods valued at one baht and above starting in May.
Currently, goods imported to Thailand and sold for less than 1,500 baht per parcel are exempt from VAT. However, the Finance Ministry and Revenue Department have been working on legislation to collect VAT on these goods, with completion expected by May, according to Deputy Finance Minister Julapun Amornvivat.
The aim of this measure, as emphasized by the prime minister, is to ensure fairness for small businesses in Thailand. By collecting VAT on goods valued below 1,500 baht, both foreign and domestic operators will be subject to the same tax rate, promoting a level playing field.
Local small and medium-sized enterprises (SMEs) are expected to benefit from this move, as it should improve their competitiveness. The influx of low-priced Chinese goods flooding the Thai market has created price competition, particularly in the e-commerce sector, where Chinese products are sold through platforms like Lazada, Shopee, and TikTok Shop. The availability of cheap imported goods has been a challenge for local SMEs, and the VAT collection on these goods is anticipated to reduce the trade deficit with China, which currently stands at 1 trillion baht per year.
Paul Srivorakul, CEO of aCommerce, a leading e-commerce enabler, expressed support for the government’s policy, stating that it protects local businesses from unfair competition. Import duties and VAT on low-value goods are expected to increase government revenue significantly, given the volume of such imports. With e-commerce accounting for 15% of retail value, the impact on government revenue could be substantial.
However, there are concerns regarding the enforcement of duties on low-value goods, as it may complicate customs procedures, potentially slowing down the import of legitimate goods and affecting businesses reliant on imported products. E-commerce platforms like Lazada, Shopee, and TikTok Shop, which currently benefit from the availability of cheap imported goods, may also face challenges if the new rule affects consumer purchasing behavior.
Nevertheless, the positive effects on local SMEs and the Thai economy are deemed to outweigh the potential impact on Chinese e-commerce platforms and local consumer sentiment. To further streamline the process, experts suggest implementing a simplified tax structure, such as a flat-rate tax model for low-value imports, to ease the administrative burden on customs and businesses.
Another crucial aspect is the use of data-driven and technology-enabled customs processes. Having an automated system for declaring, assessing, and collecting duties is essential for streamlining processes at scale and reducing opportunities for misdeclaration and evasion.
The move towards collecting VAT on low-value imports is seen as a fresh attempt to promote fair trade in Thailand. Previously, importers could undercut Thai SMEs, which were required to pay the levy. By addressing this issue, the government aims to protect local SMEs and create a more level playing field. Efforts to monitor border trade and prevent customs duty evasion are also being emphasized to ensure fair competition.
The Federation of Thai Industries (FTI) has stressed the need for better protection of SMEs against the influx of cheap Chinese products, which has led to a significant reduction in production for some local manufacturers. The FTI has also called for the inspection of certain products to ensure compliance with safety and environmental standards.
