Grey Costs Of Small Business In Thailand.

[soundman]

In many threads across the Thai Visa forum these issues appear time and time again.

maxbus1

Not to hijack an intelligent post (I'm thinking of moving to Chonburi with the wife and finding something for me to do business wise, small food or coffee or beer place) but my biggest concerns and questions are about what will be required of the crooked police and mafia? I can't imagine all these stories about bribes are not true... A farang face on a new storefront, what kind of things will I be concerned about?

Maybe I should go to work for someone else... I'm a plumber and building inspector in the states. Probably not much call for this type of instruction or service in thailand? Thanks guys. max.

p.s. yes, I'm looking up to you business owners!

Lets discuss!

In my experience small business in rural Thailand is not subject to open & blatant protectionism rackets and the like. This may be different for those running businesses in tourist areas, but I have little experience there & would like to hear from those that do.

Situations that commonly creep up where "bribes" or "incentive payments" are expected are more along the lines of: For eg.

You want a new water line to your business. There will be a standard fee from the water department, however, unless a "present" is included for the supervising engineer it may take months to receive service. This is by no means an everyday occurrence in the utilities sector - but does happen.

Highway tax - police will allways find something wrong with your delivery vehice or driver. Daily occurrence & just has to be factored into the cost of your product. No tax deduction though!

One "scam" that I want to hear more about has to do with interent cafes and customers downloading ripped Thai music. Anyone with firsthand experience please post.

Another situation that I commonly come across is when agents are coming to buy my products for another company that they work for. They expect a backhander or commission from my business & it is openly discussed before the actual customer signs on the dotted line.

Please post any "grey" costs to your business that you may like to share in this thread.

Cheers,

Soundman.

[chavy]

Sorry, didn't see this thread but have posted something similar for Max to be aware & consider.

However, I have come accross the company paying off the police for a smooth Christmas party for alohol consumption & late night finishing, also compulsory invite for the local cops to attend the function. They win both ways...a pay off & a free night out !!

[wolfmanjack]

Made a gift to get the permit for electric. I got tired of the maybe tomorrow every day. When the gift was handed over the permit was found on the desk in a pile of papers. Then white out was produced to change the date. An appropriate "gift" for the factory license, building permit, and other associated licenses, etc.

Every year 2 different branches of the Army appear for donations and 1 group of police. Other "civil servants" drop in from time to time for donations to a party they are having.

After all you can't expect them to make their monthly payments on their 1 million baht cars on their salaries do you? It usually only amounts to a couple of thousand baht a month though.

[Mid]

the biggest hidden cost for start ups is paying TAX on income and salary that you don't earn .................................

[londonthai]

it's not only the officials but your immediate neighbours might want to take advantage of your business - they might want to charge you for parking if your customers or delivery cars are coming to your property. They might expect you to rent a land from them for the parking and park their own cars there. Or organise for them a telephone line when you are trying to get a spare number from the telephone exchange installed (in some areas of bangkok there is a long waiting list).

they might start to complain about the noise or smells or even the fact that they don't want farang clients in their neighbourhood. Some complains you can ignore but handing out a few beers or some rice for the elderly or similar presents might be advisable. It's bribing on a small scale.

as to dealing with officials - the best if your thai partner deals with it. They do better understand all the intricacies as well will have some relatives/friends in the offices.

[cmsally]

Never had any trouble with bribes etc. in any tourism or export related businesses.

For other businesses especially anything related to govt contracts it is quite common but the furthest we go to is taking someone out to dinner or a drink or two.

Favours are mostly reciprocal and if it is seen you could not provide a reciprocal favour then probably the question of money could come into it.

Normally we manage along those lines and if someone has done you a favour that is fine with me, it is pretty similar elsewhere in the business world.

But this is strictly along business lines, nothing such as police extortion, local mafia - we don't have any of those but could soon sort them out if there were.

[wolfmanjack]

the biggest hidden cost for start ups is paying TAX on income and salary that you don't earn .................................

Yeah I forgot about the TAX being based on the size of my buildings instead of the actual profits i make. The revenue collectors came right out and told they did not care what my receipts said that I must be making at least XXXXXXXX much money to afford a building this size etc. They did not want to here that i paid for the land and buildings with money from the USA before i even produced 1 item.

[cmsally]

Revenue collectors are notorious for trying to collect indiscriminately. From what I've seen you can pay your tax on time, correct amount and they can still come out at the end of the year and say you owe XXXX amount extra. This I suspect is because they have collection targets which are not met and are trying to make up the difference.

It's a difficult balance to try and pay the correct amount and not make them hate you which would make it worse.

But if they are trying to charge you income tax on the size of your building that's way out of line.

[soundman]

Revenue collectors are notorious for trying to collect indiscriminately. From what I've seen you can pay your tax on time, correct amount and they can still come out at the end of the year and say you owe XXXX amount extra. This I suspect is because they have collection targets which are not met and are trying to make up the difference.

It's a difficult balance to try and pay the correct amount and not make them hate you which would make it worse.

But if they are trying to charge you income tax on the size of your building that's way out of line.

Yeah - the tax collectors can be very demanding. Unless you have paperwork in spotless order they tend to make ballpark assessments just by looking at the size of your premises, how much visable stock on hand & how many staff they see floating around. Quite often they have a rough guide as to how much profit a business of a certain size within a given industry should make, they use this figure and then usually add an "annoyance" factor onto it as well.

Would give an arm & a leg to have a look at those guides - as you pointed out Sally, it is a fine line to walk on knowing the "right" amount of tax to pay!

Cheers,

Soundman.

[simon43]

A grey cost (or possible cost) in the hotel business is where taxi drivers who bring customers to our hotel expect a commission payment, even though the customer has already booked with us and directed the taxi driver straight to our hotel! Like many hotels, we do pay when taxi drivers bring customers to us who have not previously booked, but I'm damned if I'm going to pay a commission to a taxi driver who is just following the customer's directions.

Oh - I'm talking about Phuket, home of the tuk-tuk and taxi mafia

Simon

[soundman]

A grey cost (or possible cost) in the hotel business is where taxi drivers who bring customers to our hotel expect a commission payment, even though the customer has already booked with us and directed the taxi driver straight to our hotel! Like many hotels, we do pay when taxi drivers bring customers to us who have not previously booked, but I'm damned if I'm going to pay a commission to a taxi driver who is just following the customer's directions.

Oh - I'm talking about Phuket, home of the tuk-tuk and taxi mafia

Simon

How do you deal with that without getting a bad rep. amongst the drivers?

Piss them off enough & they might black ban pickups or charge exhorbidant fees for rides to your guesthouse - not good for your guests, even though the guests will have little idea of what is actually going on - they will think the taxi's are just ripping them off.

Cheers!

[cmsally]

If you are willing to pay commission for the customers who have not booked, for the ones that have booked just tell the taxi drivers that you have already paid commission for these but to another person (ie travel agent). So you tell them as much as you would like to pay them you are only left with a percentage of the cost therefore have nothing left to pay them.

[onethailand]

the biggest hidden cost for start ups is paying TAX on income and salary that you don't earn .................................

Haha... tell me about it! Got two years of that under my belt now...

Ah - one to add. For God knows what reason, the powers that be at the Revenue Dept decided to audit one of my companies (the Amity Treaty one). Took all of my books (which still haven't been returned after four months), called a couple weeks later and said that I owed them about 160K in tax - when asked why, they said they were declaring my VAT unrecoverable - even though I produced proper receipts for everything, without buying or selling any of my VAT as many companies do.

I gave them all sorts of hel_l, finally told off the highest person in the department I could find, over the phone, in very strong (albeit grammatically weak) Thai. I told them to bring the lawyers on as well because I would expose them very quickly.

Two days later they declared I owed no VAT. But I still don't have my books back more than two months later...

... meanwhile, someone called the accounting firm I hired and told them they were going to audit the other company. The accountant called us, and my secretary told them we had not received any notice. After another two weeks of argument, it turns out that they were going to use the power of attorney I gave the accountants for the purpose of doing our books in February - even though powers of attorney are supposed to expire in three months.

Again, more hel_l... now we have to write a document to cancel a power of attorney which should have automatically expired...

... then finally, we got an official document telling us to go explain to the Revenue Dept why we had not claimed our tax refund from last year (about 2K) - obviously not having figured out it would cost us more to claim that money than to just forego the refund. Three different branches of the Revenue Dept started tossing this one around trying to pin the blame on someone for incorrectly issuing the letter in the first place...

I tell you what - I'm so sick and tired of this BS that I am going to close down everything that I don't need and move it offshore...

[simon43]

Soundman, we already tell all our pre-booked customers to NEVER take any limousine or taxi from Phuket Airport. This is because of the terrible reputation these guys have for either ripping off customers or taking them to another hotel! We provide a 24/7 free pick-up service just to ensure that our customers arrive ok at our hotel.

For customers who have not prebooked, and who ask the taxi to take them to any hotel, we will always pay a fair commission to the taxi driver for bringing us more business. But if a pre-booked customer tells a taxi driver to take him to 'x hotel', then there is no reason to pay a commission to the taxi driver because he is just doing his job.

Some drivers get annoyed when we refuse to pay a commission for pre-booked customers. But my wife always deals with this and tells them to p*ss off and not to try it on again!

To be honest, we also stopped dealing with the tour agencies at Phuket Airport because they either asked for a commission of 50% of the hotel price!! Or they overcharged customers way above the retail prices for our rooms. On several occasions, I took customers back to the agent and insisted on a refund for them. Now we only do business with agents who charge no more than 20% more than our net rate, (and we do get lots of bookings from agents in BKK on this basis).

So, in summary, our hotel gave up on dealing with the agents and touts at the airport because - for the most part - they were ripoff merchants. But, thanks to our good internet marketing and good customer reviews, our hotel doesn't need to rely on agents other than for a few bookings here and there.

Simon

Edited October 13, 2007 by simon43

[astral]

My wife suggested we invite some of the local cops to our wedding ceremony.

It did not do any harm!!

LOS is place where "who you know" can be very important for a smooth life.

[andreahkg]

the biggest hidden cost for start ups is paying TAX on income and salary that you don't earn .................................

Think long and hard about all the potential potholes and headaches and do your best to get hard numbers before registering a Thai company. Even with an accounting/legal firm it was not clear to me all the taxes and fees and redundant paperwork required to establish a business here. Only after five months time do I now know it costs my little one person business over $300.00/USD per month to "work" from my laptop. Needless to say, no one wants to give you the whole story because they and everyone down the line will lose their fees. Whether you actually receive a salary or not the Thai government will take withholding tax monthly, then there is the VAT tax that the government charges on the SAME transaction multiple times, and of course the matter of the virtual office that you are required to have. And then you must pay the legal and accounting fees for filing all the paperwork monthly because unless you read and speak Thai fluently, that will also be a cost of doing business here. No one can tell me why you register a Thai company that allows you a work permit and a year long Non immigrant Business visa but still have to cross the border every 90 days. And when you go on holiday, you must "suspend" your work permit and then reactivate it when you return. I now know I can still do business with Thai companies (from the West) and be paid directly into my foreign bank account, alleviating all the fees and paperwork to the Thai government...I save over $300.00USD per month in fees and the Thai government loses a revenue source. I am glad I learned this before purchasing a condo!!

Good luck to anyone wishing to do business in Thailand...it is a great place for holiday but not without a lot of challenges and headaches on the business side...read the forums and talk to as many foreigners as you can before considering dropping any money in Thailand. While you are at it...do some research on how many Thai girl/farang men get married...and divorced...after the property purchase of course.

[torrenova]

Soundman, we already tell all our pre-booked customers to NEVER take any limousine or taxi from Phuket Airport. This is because of the terrible reputation these guys have for either ripping off customers or taking them to another hotel! We provide a 24/7 free pick-up service just to ensure that our customers arrive ok at our hotel.

For customers who have not prebooked, and who ask the taxi to take them to any hotel, we will always pay a fair commission to the taxi driver for bringing us more business. But if a pre-booked customer tells a taxi driver to take him to 'x hotel', then there is no reason to pay a commission to the taxi driver because he is just doing his job.

Some drivers get annoyed when we refuse to pay a commission for pre-booked customers. But my wife always deals with this and tells them to p*ss off and not to try it on again!

To be honest, we also stopped dealing with the tour agencies at Phuket Airport because they either asked for a commission of 50% of the hotel price!! Or they overcharged customers way above the retail prices for our rooms. On several occasions, I took customers back to the agent and insisted on a refund for them. Now we only do business with agents who charge no more than 20% more than our net rate, (and we do get lots of bookings from agents in BKK on this basis).

So, in summary, our hotel gave up on dealing with the agents and touts at the airport because - for the most part - they were ripoff merchants. But, thanks to our good internet marketing and good customer reviews, our hotel doesn't need to rely on agents other than for a few bookings here and there.

Simon

Once arriving at Phuket from my home in Pattaya to visit friends staying at the Holiday Inn I shared a taxi with a guy who from the same flight who had booked into some hotel in the right budget range but who had paid lets say Bt1200 per night when I considered it should cost about Bt800 per night. He checked in, I scouted around the hotel, it was OK but they wanted Bt1200 per night. I said I could go to an agen tand get it for Bt1000 or less and they would have to pay the agent so they might get perhaps Bt750 so Bt800 from me was a better deal. They took it but when I wanted to stay another day (low season just after the tsunami mind you !) they wanted a higher rate ! they didn't get one.

Now getting a taxi to the airport was a joke and really pissed me off, even though I live with the pattaya baht bus mafia each and every day !

PM me your place in Phuket please.