Muddle-Headed Thailand Alcohol Tax Is Due For A Long Overdue Overhaul

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WATCHDOG

Muddle-headed alcohol tax is due for a long overdue overhaul

By Nophakhun Limsamarnphun

Thailand should consider overhauling its tax regime on alcoholic beverages, especially in view of freer trade within Asean countries and with major trading blocs such as European Union.

At present, Thailand does not tax alcoholic beverages according to their alcohol content, so different products are subject to different tax rates.

A study by Dr Pongsak Hoontrakul and Dr Banchorn Songsamphun shows that Thais consumed a total of 260 million litres of pure alcohol in 2010. The products were mostly beer (fermented alcohol) and white spirits as well as whiskies (distilled alcohol), accounting for about 75 per cent of the total consumption.

According to 2009 tax figures, the brewing industry paid a total of Bt58.7 billion in taxes, accounting for 62 per cent of total tax collection on alcoholic beverages. However, tax revenues on white spirits and whiskies were only Bt16.1 billion (17 per cent) and Bt2.6 billion (3 per cent), respectively.

This shows that the tax system is biased in favour of heavy drinkers, since distilled alcoholic beverages are subject to lower tax rates when compared to fermented products, especially beer. In other words, the current tax regime promotes consumption of beverages with high alcohol content, especially white spirits and whiskies, which have long been widely popular among the rural poor.

While the amount of tax revenue on these beverages is huge, the cost of public healthcare for heavy drinkers is not small either. As a result, the tax regime should be overhauled to tax these beverages based on their alcohol content. In other words, higher alcohol content must be subject to higher taxes. This will help slow the growth rate of pure alcohol consumption in this country, thus lowering the longer-term expenditure on public healthcare.

In addition, the government is expected to benefit from more tax collection if these products are taxed according to alcohol content. For example, the white spirit tax is currently Bt157 per litre for 28-40 degree products, compared to Bt630 for beer, whose alcohol content is lower.

The tax overhaul is also necessary due to the liberalisation of trade and investment. The Asean Free Trade Area (Afta) is a good example of conditions under which imported products via other Asean member countries can be sold relatively cheaply in Thailand's domestic market.

Scotch whiskies, for instance, are imported into the Phillippines, an Asean member, and then repackaged for other markets in the regional grouping, such as Thailand. Once the products are regarded as Asean products coming from the Philippines, they are subject to zero duty when imported into Thailand, making lower-end whiskies with high alcohol content available at a very low price to Thai consumers.

Another similar business strategy is to set up a large-scale brewery in Laos, for example, then export the products into Thailand to benefit from zero import duty, as Laos is also a member of Asean.

As a result, the government should modernise the tax regime on alcoholic beverages in preparation for freer trade with other countries by taxing these products properly. Previously, it was argued that such a change would hurt low-income earners who are among the major consumers of white spirits with high alcohol content. Now, such an argument is not valid, as beer consumption has also been rising rapidly among lower-income groups due to its relatively low price.

If alcoholic drinks cannot be banned, it's better to use the tax rates and pricing of products to discourage people from consuming products with high alcohol content, which undoubtedly damages their health.

-- The Nation 2011-03-12

[BuckarooBanzai]

I think the real purpose of this article can be found in the last sentence:

If alcoholic drinks cannot be banned, it's better to use the tax rates and pricing of products to discourage people from consuming products with high alcohol content, which undoubtedly damages their health.

Prohibition anyone?

[craigt3365]

Unfortunately, something needs to be done here. Thai's are heavy drinkers. Usually working all day for a few hundred baht, only to spend it all drinking that night...and getting into fights, arguments, trouble, etc. But not prohibition!

[asiawatcher]

Unfortunately, something needs to be done here. Thai's are heavy drinkers. Usually working all day for a few hundred baht, only to spend it all drinking that night...and getting into fights, arguments, trouble, etc. But not prohibition!

Could agree but it is not a large majority as many Buddhist do not drink at all. This is only a small minority making up for those who don't drink! LOL. But the amount of taxes derived from alcohol nearing 60 Billion Baht means no way will they stop alcohol - they could not afford to!

[12DrinkMore]

Unfortunately, something needs to be done here. Thai's are heavy drinkers. Usually working all day for a few hundred baht, only to spend it all drinking that night...and getting into fights, arguments, trouble, etc. But not prohibition!

Bit of a wide sweeping statement that, especially as you add in the word "usual".

You are a "Global Moderator". I thought that one function of the "Moderators" is to "police the rules".

So maybe you should re-read the rules? Specifically....

7) Not to post slurs or degrading comments directed towards any group on the basis of race, nationality, religion, gender or sexual orientation.

8) Not to post extremely negative views of Thailand or derogatory comments directed towards all Thais.

After nearly fifteen years of living in Thailand I have seen just two incidents of Thais getting into a brawl. I have seen many more incidents of pissed-up foreigners getting into trouble. Maybe I lead a sheltered life, but I have seen no evidence that it is "usual" for Thais to behave in the way you stated. If you think it is a major issue in Thailand, then go and experience the "binge drinking" culture in the UK.

Edited March 12, 2011 by 12DrinkMore

[hammered]

A change will help the Thai wine industry which is currently burdened with high tax because of the anomolies.

The poor in the villages mostly drink and will probably continue to do so locally distilled Lao Khao which being illicit is not taxed.

[colinscarr]

Prohibition, hmm

Khun Capone, the Macha Bucha Day Massacre...

Seriously, we';ve quite enough illegal drug problems in Thailand without adding alcohol to the list of banned substances

[craigt3365]

Unfortunately, something needs to be done here. Thai's are heavy drinkers. Usually working all day for a few hundred baht, only to spend it all drinking that night...and getting into fights, arguments, trouble, etc. But not prohibition!

Could agree but it is not a large majority as many Buddhist do not drink at all. This is only a small minority making up for those who don't drink! LOL. But the amount of taxes derived from alcohol nearing 60 Billion Baht means no way will they stop alcohol - they could not afford to!

I would say 99% of the Thai men I know drink...and heavily. Women? Not so much. Head to the village and they start with 40 degree around 7am and drink all day...at least until either the booze or the money runs out.

Here's and interesting excerpt from an article on drinking in Thailand:

Current Trend on Alcohol Consumption:

Alcohol consumption regulation is loosely enforced. The alcohol industry heavily invests in mass production, promotion, and advertising. These result in the skyrocketing number of alcohol consumption in Thailand.

Within 6 years (1999-2003), the market growth rate of beer in Thailand was 4 times faster than the world market (10.1 % for Thailand versus 2.5 % for the world market.) The market growth rate of spirit in Thailand was 8 times higher than the world market (3.2% in Thailand versus 0.4% in the world market.) Clearly, Thais has increased alcohol consumption dramatically. According to WHO, Thailandhad alcohol consumption per capita 0.26 liter per person per year (L/P/Y) in 1969 and increased to 8.47 L/P/Y in 2004. This is 33 times increase within 43 years. The most concerned groups are the youth, 15-19 years old, and the female group. In the past 10 years (1996-2006) the number of regular drinker increased 45% for youth and 30% for female.

http://www.stopdrinknetwork.com/uploadcontent/pub_alth/thumbnail/cms-Th-19-2805.pdf

This is crazy:

In a 1999 survey of 1725 students aged 15 to 21 years (893 males and 832 females) attending one of three vocational schools in Chiang Rai Province, alcohol consumption during the previous three months was reported by 826 males (92.5%) and 670 females (80.5%).

The unrecorded alcohol consumption in Thailand is estimated to be 2.0 litres pure alcohol per capita for population older than 15 for the years after 1995 (estimated by a group of key alcohol experts)

A survey found that 62% of traffic accident victims had a positive blood alcohol concentration. An estimated 45% of deaths from traffic accidents in Thailand are due to alcohol consumption.

http://apapaonline.org/data/National_Data/Thailand/Situation_Thailand.pdf

[12DrinkMore]

Governments raise taxes on consumer purchases to fund government spending (not exactly the true story, but it is the widely held belief). Booze and baccy are two main targets, as there is a bit of perceived "moral justification" for targeting them

The above article wants to introduce higher taxes to perform some social engineering to reduce the consumption of alcohol by making it more expensive. Any attempt at this will hit the poor far far harder than the rich, who can drink as much as they want at almost any price. Once again the few are trying to make the moral judgement for the many, and legitimising and enforcing it through the State.

Along comes the self-growing Nanny State, poking its nose into everybody's business. Telling what we should and shouldn't do.

If the author wants to achieve something, then he should try to increase the level of understanding in the population of the risks and dangers of excessive alcohol consumption. Not remove an option of relief from the daily grind by pricing it so high that it becomes the privilege of the wealthy to consume alcohol on a regular basis.

[rkidlad]

Unfortunately, something needs to be done here. Thai's are heavy drinkers. Usually working all day for a few hundred baht, only to spend it all drinking that night...and getting into fights, arguments, trouble, etc. But not prohibition!

Bit of a wide sweeping statement that, especially as you add in the word "usual".

You are a "Global Moderator". I thought that one function of the "Moderators" is to "police the rules".

So maybe you should re-read the rules? Specifically....

7) Not to post slurs or degrading comments directed towards any group on the basis of race, nationality, religion, gender or sexual orientation.

8) Not to post extremely negative views of Thailand or derogatory comments directed towards all Thais.

After nearly fifteen years of living in Thailand I have seen just two incidents of Thais getting into a brawl. I have seen many more incidents of pissed-up foreigners getting into trouble. Maybe I lead a sheltered life, but I have seen no evidence that it is "usual" for Thais to behave in the way you stated. If you think it is a major issue in Thailand, then go and experience the "binge drinking" culture in the UK.

Just two incidents? I've seen far more, and some real nasty stuff as well. The fight just carries on and no one tries to stop it. The good thing is you can avoid trouble in this country if you want. Unlike in the UK.

Simple fact is - people like a drink, and they always will. You can tax it up to the hills, and people will just create drinks like lao kao. Necessity is the mother of all invention.

[taff33]

Craig3365

99%of men drink heavily where you live, you must live in a clever place.I live in the sticks (jungle) and it is not like that here.

[needforspeed]

"62% of traffic accident victims had a positive blood alcohol concentration"

Victims how about the initiators of accidents.

[powderpuff]

And Lao Khao attracts no tax at all.

[RKASA]

If you look at what is taxed and how it is taxed (like alcohol and other things) I believe the issue of import and export was the driving force in the current policies as well as who owns what.

The next policy if this is overhauled will be written by and reflect the current status of those items and the social impact of alcohol itself is just another cover story for any changes. It is easy to sell (it is for your own good) rather then (protect my ass-sets).

The abuse of alcohol or drugs can be seen everywhere - check out all the poor people in Hollywood or a long list of other persons in the media that can't control the use of mind altering substances. Tax policy won't change them - not even prohibition will.

[Lite Beer]

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[fatfather]

Craig3365

99%of men drink heavily where you live, you must live in a clever place.I live in the sticks (jungle) and it is not like that here.

On the country side a man works hard 10hrs a day on a farm and can make ~150 to 170 Baht. A big bottle of Lao Khao kosts about 70/80 Baht, a bottle of beer is about 40/45 Baht. Thais like to drink beer, but it is just too expensive. A change in pricing policy can only have a change to the good. I don't think that Thais have a bigger problem with drinking than other folks in the world (...look at Germany, England, all Scandinavia etc...) but here they drink too much of the cheap bu__shit. Make beer affordable and hard alcohol more expensive, good idea I think...

fatfather

[barrybankruad]

A change will help the Thai wine industry which is currently burdened with high tax because of the anomolies.

The poor in the villages mostly drink and will probably continue to do so locally distilled Lao Khao which being illicit is not taxed.

Correct. Over the past 10 years or so I have seen the price of legal Lao Khow double. When it was reasonably cheap the illicit production of 'home brew' rice was relatively small. As the price of the spirit rises so does the production of home brew. They will never stamp it out, you should see the number of BIB who partake of it.

[TimeBandit2]

When conducting the study, how do they know when alcohol was consumed by Thais and when it was consumed by foreigners, tourists or otherwise?

Especially when arrivals are up the tens of millions, according to the government, though maybe it's because each of them is only spending 37 baht per day

Wasn't the "increase in Thais consuming alcohol" used as justifcation for raising the tax in the first place?

And what about the part of the article that says that beer is taxed at more than 600 baht per litre. Wouldn't that make a bottle of Chang cost 680 baht or so?

It's abundantly clear that no-one in this country is capable of conducting real social science or studying any problem scientifically.

How about studying why despite having agreements with ASEAN countries to import beer there is no ASEAN beer to be found in Thailand anywhere.

[TimeBandit2]

I actually agree with the thrust of this article, now that I've re-read it several times.

[rotary]

This should give home brew kits a boost even for farangs. If they raise the tax so high they lose the tax money....hmmmmm. Is that what they really want to do?

When conducting the study, how do they know when alcohol was consumed by Thais and when it was consumed by foreigners, tourists or otherwise?

Especially when arrivals are up the tens of millions, according to the government, though maybe it's because each of them is only spending 37 baht per day

Wasn't the "increase in Thais consuming alcohol" used as justifcation for raising the tax in the first place?

And what about the part of the article that says that beer is taxed at more than 600 baht per litre. Wouldn't that make a bottle of Chang cost 680 baht or so?

It's abundantly clear that no-one in this country is capable of conducting real social science or studying any problem scientifically.

How about studying why despite having agreements with ASEAN countries to import beer there is no ASEAN beer to be found in Thailand anywhere.

[inmysights]

If the author wants to achieve something, then he should try to increase the level of understanding in the population of the risks and dangers of excessive alcohol consumption. Not remove an option of relief from the daily grind by pricing it so high that it becomes the privilege of the wealthy to consume alcohol on a regular basis.

Does this 'increasing of understanding ...' include those who can afford better quality booze? Or are you merely condescending the poor?

Didn't/doesn't work in the West (White Lightning et al) and certainly won't here.

As already stated, the illegitimate production of lao khao will continue regardless, much like pocheen in Ireland, Moonshine in the US and ethanol based hooch in Russia.

Apart from 'prohibition', the only thing that would work is to make healthier alternatives more accessible, financially.

I am aware wine production not one of Asia's best suits, but a massive reduction in tax on that would be a start. In my experience, Thais much prefer wine but of course can't afford it.

And people will always want to get pissed.

[BuckarooBanzai]

The easy answer is to just stop selling booze between 2 pm and 5 pm. That should take care of the problem. Oops, sorry, they have already done that. What's next?A credible approach might be to begin education of the youth on abuse of alcoholic. How about enforcement of drunk and disorderly and a day and night in the monkey house. How about quality standards that do away with legalized sale of rocket fuel for consumption. In my mind taxes will benefit the few at the expense of the many. It is a very serious problem that has not been addressed seriously by those in power.

[12DrinkMore]

Does this 'increasing of understanding ...' include those who can afford better quality booze? Or are you merely condescending the poor?

Didn't/doesn't work in the West (White Lightning et al) and certainly won't here.

As already stated, the illegitimate production of lao khao will continue regardless, much like pocheen in Ireland, Moonshine in the US and ethanol based hooch in Russia.

Apart from 'prohibition', the only thing that would work is to make healthier alternatives more accessible, financially.

I am aware wine production not one of Asia's best suits, but a massive reduction in tax on that would be a start. In my experience, Thais much prefer wine but of course can't afford it.

And people will always want to get pissed.

Dunno what "better quality" booze is; booze is mostly water with some percentage of ethanol. And I am certainly not condescending to the poor. The rich should not see themselves above the law and need to be educated as well. Unfortunately you are right with the observation that it will be difficult.

Prohibition would never work in Thailand. Didn't work in the States, and would not stand any chance of working here, none whatsoever.

Wine as a drink of preference for Thais? IME that is not true, beer and whiskey are by far the favourites. I know of a couple of upper middle class Thais who like drinking wine, but otherwise everybody else I know drinks beer or shares a bottle of spirits around.

I would also welcome a drop in import taxes on wine, but there are already import wines available for under 300 baht/bottle.

And people will always want to get pissed. Certainly cannot argue against that point. They just need to keep it under control and drink responsibly.

[ginjag]

The easy answer is to just stop selling booze between 2 pm and 5 pm. That should take care of the problem. Oops, sorry, they have already done that. What's next?A credible approach might be to begin education of the youth on abuse of alcoholic. How about enforcement of drunk and disorderly and a day and night in the monkey house. How about quality standards that do away with legalized sale of rocket fuel for consumption. In my mind taxes will benefit the few at the expense of the many. It is a very serious problem that has not been addressed seriously by those in power.

Picture this--Issan--most Karaoke-and decent bars will not sell Lao Khao, It is near the main killer of thai rural people, Traffic accidents, Liver, you name it.----------The worrying thing here is the young school and youths, who buy a litre, and sit in groups passing it arround until it's finished. Then sure enough off on their motor /B and seek out other friends who may have a bottle. it is mind blowing stuff. My government health officer said up to 70 per cent of rural Thai are alcoholics, and it is this white whiskey, I can tell by anyones face (near enough) if they are on the stuff. The expression... and colour, but most of all the yellow eyes. This odd look is similar to the wino's we know in europe.

[BuckarooBanzai]

Yes, the yellow eyes are most likely liver disease. Good luck on a transplant as they are non existent. The stuff that is sold is essentially poison.

[Pib]

Whatever tax changes may occur will be determined by expected voter reaction.