Thai Finance Minister Korn Says No To Oil Excise Tax Cut

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ENERGY

Korn says no to oil excise tax cut

By WATCHARAPONG THONGRUNG

THE NATION

Finance Minister Korn Chatikavanij yesterday ruled out a cut in the oil excise tax, even though the retail diesel pump price could pass the psychological level of Bt30 per litre.

"We must be thorough in considering cutting the oil excise tax, as the income is vital for economic development necessary to narrow the social disparity," he said.

A tax cut may not stabilise the price in the long run and could further widen the disparity, he said.

In 2008, when oil prices hit a record high at over US$140 per barrel, the Samak government reduced the oil excise tax for six months at a cost of Bt29 billion.

Now, winter demand has boosted the refined diesel price above $100 per barrel for the first time in two years.

The local diesel pump price today stands at Bt29.99 per litre, after the National Energy Policy Committee decided yesterday to reduce the contribution from diesel sales to the Oil Fund by 50 satang per litre.

Since the contribution to the Oil Fund is as little as Bt0.15, all eyes are on the Finance Ministry to see whether it will scrap the excise tax to keep production cost and the cost of living in check if oil prices rise further.

Korn said demand would spike due to the cool weather. However, the excise tax should not be cut for everyone, as among diesel consumers are those who still can afford the high price.

While supporting the Oil Fund's move, he said Prime Minister Abhisit Vejjajiva, at the last Cabinet meeting, highlighted the need for the government to take into account a wide range of variables in the cost of living, like energy and food prices.

The short- and medium-term measures to ease the cost of living should be completed and announced on December 17, he said. A Finance Ministry source said they might include an extension of the free-electricity scheme.

For every litre of diesel, the retail price is Bt9.52 higher than the ex-refinery price, due mainly to the excise tax of Bt5.31, marketing margin of Bt1.10 and value-added tax.

The oil excise tax is the biggest revenue contributor to the Excise Department. Last month, the department collected Bt12.4 billion from oil, followed by Bt7.7 billion from vehicles, Bt5.6 billion from beer, Bt4.7 billion from tobacco and Bt4 billion from alcohol products.

Energy Minister Wannarat Charnnukul said that if global oil prices keep advancing, to keep the retail diesel prices below Bt30 would require a cut in the excise tax. He said he had discussed this option with the Finance Ministry. Due to the reduction in the contribution to the Oil Fund, the fund will now run at a loss of Bt537 million per month. The fund's Bt28 billion would be reserved for emergency use.

"Next time, if we maintain the diesel price, it will be done through a tax cut," he said.

While diesel prices have been lowered, the price of diesel B5 remains unchanged at Bt29.09.

Viraphol Jirapraditkul, director-general of the Energy Policy and Planning Office, also insisted that the Oil Fund is no longer capable of subsidising the diesel price.

The fund is now supporting the below-market price of liquefied petroleum gas (LPG) and the subsidy is on the rise, as global LPG cost $911 per tonne this month, compared to $782 last month. Higher consumption of LPG also increased the subsidy.

Based on imports of 143,426 tonnes in November, the subsidy totalled Bt2.4 billion. As of December, with demand estimated at 140,000 tonnes, the fund will need to spend Bt2.5 billion-Bt2.6 billion for this month's subsidy.

The fund also subsidises the prices of some other fuel products like diesel B5, gasohol E20 and gasohol E85, as part of the national policy to promote alternative energy.

-- The Nation 2010-12-09

[Pib]

[quote

]"We must be thorough in considering cutting the oil excise tax, as the income is vital for economic development necessary to narrow the social disparity," he said.

But cutting the excise tax which is really a regressive tax in nature as it is more greatly felt in the pocket book by the poor motorist in his 10 year old beat-up pickup truck than the rich motorist in his new red tagged Mercedes. The guy in the pickup truck is probably carrying goods to the market for sale while the guy in the Mercedes is going to the bank to deposit more money. Sure, this excise tax is narrowing social disparity everyday....we all need to drive a lot more so we can help in narrowing this disparity.

[lannarebirth]

[quote

]"We must be thorough in considering cutting the oil excise tax, as the income is vital for economic development necessary to narrow the social disparity," he said.

But cutting the excise tax which is really a regressive tax in nature as it is more greatly felt in the pocket book by the poor motorist in his 10 year old beat-up pickup truck than the rich motorist in his new red tagged Mercedes. The guy in the pickup truck is probably carrying goods to the market for sale while the guy in the Mercedes is going to the bank to deposit more money. Sure, this excise tax is narrowing social disparity everyday....we all need to drive a lot more so we can help in narrowing this disparity.

Except most Thais don't have a car or truck at all. I think they aspire to take that old beat up truck off the hands of the "poor motorist" when he upgrades eventually (it is wished) to a newer vehicle.

[Pib]

[quote

]"We must be thorough in considering cutting the oil excise tax, as the income is vital for economic development necessary to narrow the social disparity," he said.

But cutting the excise tax which is really a regressive tax in nature as it is more greatly felt in the pocket book by the poor motorist in his 10 year old beat-up pickup truck than the rich motorist in his new red tagged Mercedes. The guy in the pickup truck is probably carrying goods to the market for sale while the guy in the Mercedes is going to the bank to deposit more money. Sure, this excise tax is narrowing social disparity everyday....we all need to drive a lot more so we can help in narrowing this disparity.

Except most Thais don't have a car or truck at all. I think they aspire to take that old beat up truck off the hands of the "poor motorist" when he upgrades eventually (it is wished) to a newer vehicle.

"Most Thais don't have a car or truck at all!" Well, you are probably right if you count young children and the old generation also But when it comes to motor vehicles (cars/trucks/motorcyles...all of which use fuel thereby paying the fuel tax) on the roads of Thailand, there there is definitely no shortage of motor vehicles...and places like Bankgok, it's just a constant traffic jam due to all the vehicles/bumper-to-bumper traffic. One of my in-laws got her first car a few weeks ago...a used Mazada...the car is about 5 years old....she is financing it over a 3 year period...ain't driving it too much because she says fuel is so expensive...but I guess she finally decided that doing the bus thing all the time was not her desires anymore.