There is much discussion on why beer prices have gone up so much, while the government anounced a raise in excise tax from 55% to 58%.

Logic would see price go up 3%!

Obviously prices have gone up much more, up to 15%, so many people are complaining that the wholesalers are cheating and making lots of extra money by raising prices much higher then what the government receives.

Not so, courtesy of how taxes are applied in Thailand. Below is exactly how the excise tax influences the end price. Don't ask me why they calulate like this in Thailand, but they do!

For ease, I'll use 100 Baht as the base price on which to calculate tax.

1. Excise tax = (base price) * {Rate of excise tax/1-(1.1 * Rate of excise tax)}

= (100) * {0.55/1-(1.1*0.55)}

= 100 * 1.392

= 139.2 Baht

2. Base VAT = base price + Excise tax

= 100 + 139.2

= 239.2

3 VAT = Base VAT * Rate of VAT

= 239.2 * 0.07

= 16.744

Total product price = Base price + excise tax +VAT

= 100+ 139.2+16.744 = 255.9 Baht

So we end up practically with 155.9% of taxes collected on a 100 Baht product!!!

Now we'll raise the excise to 58% and recalculate:

1. Excise tax = (base price) * {Rate of excise tax/1-(1.1 * Rate of excise tax)}

= (100) * {0.58/1-(1.1*0.58)}

= 100 * 1.602

= 160.2 Baht

2. Base VAT = base price + Excise tax

= 100 + 160.2

= 260.2

3. VAT = Base VAT * Rate of VAT

= 260.2 * 0.07

= 18.21

Total product price = Base price + excise tax +VAT

= 100+ 160.2+ 18.21 = 278.41Baht

So the total tax has shot up to 178.4%, or a 23% increase!

BTW, they do exactly the same when importing for example cars or wine, that's why you see such a high total import tax levied, even though the actual stated import is only 60% or so. You'll still end up paying over 200%, that's why wine and imported cars are some much more expensive then in the West!

There is much discussion on why beer prices have gone up so much, while the government anounced a raise in excise tax from 55% to 58%.

Logic would see price go up 3%!

Obviously prices have gone up much more, up to 15%, so many people are complaining that the wholesalers are cheating and making lots of extra money by raising prices much higher then what the government receives.

Not so, courtesy of how taxes are applied in Thailand. Below is exactly how the excise tax influences the end price. Don't ask me why they calulate like this in Thailand, but they do!

For ease, I'll use 100 Baht as the base price on which to calculate tax.

1. Excise tax = (base price) * {Rate of excise tax/1-(1.1 * Rate of excise tax)}

= (100) * {0.55/1-(1.1*0.55)}

= 100 * 1.392

= 139.2 Baht

2. Base VAT = base price + Excise tax

= 100 + 139.2

= 239.2

3 VAT = Base VAT * Rate of VAT

= 239.2 * 0.07

= 16.744

Total product price = Base price + excise tax +VAT

= 100+ 139.2+16.744 = 255.9 Baht

So we end up practically with 155.9% of taxes collected on a 100 Baht product!!!

Now we'll raise the excise to 58% and recalculate:

1. Excise tax = (base price) * {Rate of excise tax/1-(1.1 * Rate of excise tax)}

= (100) * {0.58/1-(1.1*0.58)}

= 100 * 1.602

= 160.2 Baht

2. Base VAT = base price + Excise tax

= 100 + 160.2

= 260.2

3. VAT = Base VAT * Rate of VAT

= 260.2 * 0.07

= 18.21

Total product price = Base price + excise tax +VAT

= 100+ 160.2+ 18.21 = 278.41Baht

So the total tax has shot up to 178.4%, or a 23% increase!

BTW, they do exactly the same when importing for example cars or wine, that's why you see such a high total import tax levied, even though the actual stated import is only 60% or so. You'll still end up paying over 200%, that's why wine and imported cars are some much more expensive then in the West!

Great explanation - appreciated

http://www.customs.go.th/Customs-Eng/Sampl...?menuNme=Sample

The above is a calculation example on the website of the Thai customs, where you will also see the inverse 1.1 factor applied to the excise tax.

{Rate of excise tax/1-(1.1 * Rate of excise tax)}

It is this little rule which makes actual excise tax go up exponentially!

Not sure if interior tax is applied when paying duties on local produced alcohol, if so this would make the effect even bigger as it is levied on the amount which already includes excise tax...

Seems a VERY strange way to work it out - intended to confuse maybe?

Thanks for the figures

It means that a 3% increase in tax rate actually means a nearly 10 % increase in the end price (taking into account that middlemens' profit will not be liable to duty).

That means that the retailer can increase the price by 10% and that would cover the tax increase AND increase his profit by 10%

A 15% increase in retail still means that somebody is taking extra profits, possibly doubling their normal margin.

Seems a VERY strange way to work it out - intended to confuse maybe?

Thanks for the figures

It means that a 3% increase in tax rate actually means a nearly 10 % increase in the end price (taking into account that middlemens' profit will not be liable to duty).

That means that the retailer can increase the price by 10% and that would cover the tax increase AND increase his profit by 10%

A 15% increase in retail still means that somebody is taking extra profits, possibly doubling their normal margin.

Just called my accountant (ex tax employee) and she confirmed that interior tax is indeed levied as well. 10% on the amount with excise included but before VAT.

As per the link I supplied to the customs website.

Which would bring the price increase very close to the actual cost.

Excise tax is a fine (and abused) way to avoid WTO (world trade organisation) watchfull eyes ...

Instead of developping the country, it is more quickly rewarding to scam their people ...

Thanks Monty. I'm not disputing your figures but the the product price at the counter would have gone up 8.8%

278.41 - 255.9 = 22.51

22.51 x 100 / 255.9 = 8.8%

In my case Tiger was 610 it should now be 664 not the 700 we are paying. Someone is tickling the till.

Great info but I think you've got your brackets in the wrong place.

Should be Excise tax = (base price) * {Rate of excise tax/(1-1.1 * Rate of excise tax)}

Not Excise tax = (base price) * {Rate of excise tax/1-(1.1 * Rate of excise tax)}

Please correct me if I'm wrong.

Yes I just knocked up a quick Excel graph but don't know how to post it here. Any rise in excise duty gives an exponential rise in price.

From what I have found out the reason for the strange calculation is because the 55% tax rate is actually a percentage of the retail price.

Ie if beer sells at 100 Baht, plus Vat, the tax (at the old rate) will be 55% plus 10% Local tax, so 60.5%

So the beer will sell for 107 Baht including Vat and there will be 60.5 Bt plus 7Bt VAT, so total tax of 67.5 Baht

Beer_tax.xls

Never tried to attach an excel file before, so hope it works.

If it does and you're interested, enter the old price in the yellow box and it will tell you what the new Price SHOULD be.

At the moment it has Bdenners 610 Baht

I complain about Thailand but I think the US puts an even greater percentage of excise tax rate on alcohol. Many different ways to pluck the goose (tac reference...)

I complain about Thailand but I think the US puts an even greater percentage of excise tax rate on alcohol. Many different ways to pluck the goose (tac reference...)

I doubt it's a rip off, but now a large can of beer costs about as much as it does in UK.

Yet one more way in which this country is no longer seems attractive.

Fuel is next.

Barry