Thai editorial: Tariff cut on luxury good sounds good for some

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EDITORIAL
Tariff cut on luxury good sounds good for some
The Nation

The plan to lure more tourists would benefit certain sectors, but could have an overall detrimental effect on the economy

The Finance Ministry wants to cut import duties on luxury goods, hoping to make Thailand a "shopping mecca" like Hong Kong or Singapore. The plan is aimed at attracting even more foreign tourists to Thailand, which saw 22.3 million arrivals last year and 17.4 million in the first eight months of this year. With an economic slowdown and delays in government mega-projects, the tourism industry, expecting 26.2 million foreign arrivals this year, is now the only promising economic engine.

Areepong Bhoocha-oom, permanent secretary for finance, said the government will reduce taxes on luxury imports to a level competitive with destinations like Singapore and Hong Kong, which have zero tariffs on luxury goods. "Thailand still subjects such goods to 30-per-cent duties. If tourists could purchase all they want here, it would boost spending," he said.

The proposed reduction in import duties, initially on items like cosmetics, perfumes and wristwatches, will be submitted for Cabinet approval in one or two months, to become effective within the year. Areepong said more tourist spending would boost economic growth in the second half of the year.

The plan has the backing of importers and the tourism industry, which stand to benefit most. Tourism Council vice president Pornthip Hirunkate said the plan would be a boon to the industry because most Asian tourists do a lot of shopping here. Association of Domestic Travel president Yutthachai Soonthronrattanavate said the tax cut would help lure wealthy Chinese tourists. In the first eight months of this year, 3.2 million Chinese tourists visited Thailand.

However, economists warn that the plan could do more harm than good. Professor Teerana Bhongmakapat of Chulalongkorn University said the main beneficiaries would be the malls and the foreign luxury brands. He doubts that the tax cut would significantly increase tourist arrivals or spending. It would rather cause Thailand to lose more foreign currency. Wisarn Pupphavesa, an economist at the Thailand Development Research Institute, said the tax cut would have little impact in luring tourists since few foreigners come here looking for designer goods.

In a survey of foreign tourists last year, the Tourism Authority found that only 3 per cent who came to shop were looking for designer products. Only 4 per cent viewed Thailand as a shopping destination. More than half said they shopped in Thailand because the prices were low. Others pointed to the quality, neatness and diversity of available products.

Boonkiet Chokwatana, president of Saha Group's ICC International, a distributor of luxury products, warned that the plan would lead to more imports and increase Thailand's trade deficit. The Finance Ministry's Fiscal Policy Office recently met representatives of local luxury-goods makers to sound them out about the plan. Most opposed it, fearing their business would be damaged, a ministry source says.

The tariff cut would almost certainly boost local demand for luxury goods because of the lower prices, but Thailand would end up importing more goods and bearing higher a trade deficit. In the first half of this year the deficit topped Bt514 billion. Local producers of luxury goods are likely to be affected by cheaper imports, and the state would lose revenue from import tariffs, although some government officials estimate the loss at "a few hundred million baht".

Will the income earned from foreign shoppers buying cheaper luxury goods offset these negative consequences? The government should carefully consider the pros and cons to determine whether the plan is good for the economy and country as a whole, or whether it benefits certain groups to the detriment of the rest of society.


-- The Nation 2013-09-11

[andrewrooney]

Unfortunately I'm not in the market for any perfume or new watches.

Wake me up when they cut the import tax on wine

[1weatherman]

For some reason the Finance Ministry didn't use "a shopping hub" for Thailand and this scheme. But I'm sure someone will let them know that Thailand is the hub of hubs (mecca just doesn't cut it) and this oversight will be corrected very soon.

[ramrod711]

The government should carefully consider the pros and cons to determine whether the plan is good for the economy and country as a whole, or whether it benefits certain groups to the detriment of the rest of society.

Good advice, and it should be applied to many items on the PTP agenda, but probably won't.

[Nooky2]

"The plan has the backing of importers and the tourism industry, which stand to benefit most."

Well that seals the fate of that idea. Tourist are meant to be milked, not helped. (no pun intended)

[bigbamboo]

The bottom line is Thailand does not attract high end tourist shoppers. Matching the duty paid in HK or Singapore on some expensive items will not be enough to attract them either.

Try again boys.

[ronaldo0]

Please class cheese as a luxury!! I think its more expensive than anything i know in this country!

[worgeordie]

The Government keeps investing ?,in schemes like rice buying,rubber

subsides ,it wants to spend spend spend, and cut the tax revenue,if

you used the same practices,in your business,ordinary life you would

be bankrupt.in a very short time,somethings going to give,why can they

not learn from the past?.

regards Worgeordie

[catmac]

"............ since few foreigners come here looking for designer goods", as opposed to the hordes who come looking for Thailand's famous fakes!

[BuddyPinkham]

foreigners come here looking for designer goods. Real ones or the knock offs on Silom Road?

[PhilipCook]

reducing or removing duties on some goods will cause locals to buy locally and travelers to buy here too, a wise decision for the government to make. Hong Kong and Singapore still have the casino advantage but I wanna bet that will come legally to Thailand soon. When goods, services, entertainment are cheaper, legally obtained abroad then Thais go to them. Making them available in Thailand keeps the profits here and customer demand satisfied.

[billd766]

This will be of great benefit to any rice farmer or rubber planter looking for luxury goods.

However for the majority of people in Thailand it will be just another day in paradise.

[Thai at Heart]

The government should carefully consider the pros and cons to determine whether the plan is good for the economy and country as a whole, or whether it benefits certain groups to the detriment of the rest of society.

Good advice, and it should be applied to many items on the PTP agenda, but probably won't.

It's perfume and cosmetics. Hardly an issue of vital national concern...

[tingtongteesood]

People who come here don't want to get a $3000 bag for $2800, NO, they come here to get the fake one for $30. 'Nuff said !

[spirit47]

And for import tools and machines from europe ore USA you pay tax and freight like a idiot.

[givenall]

No tax in Hong Kong so there long way to go

Sent from my ST18a using Thaivisa Connect Thailand mobile app

[h90]

Unfortunately I'm not in the market for any perfume or new watches.

Wake me up when they cut the import tax on wine

I guess it will need another 100 years.

[ratcatcher]

This will be of great benefit to any rice farmer or rubber planter looking for luxury goods.

However for the majority of people in Thailand it will be just another day in paradise.

Yes, I think it will, imagine the pleasure the farmers will feel when wearing their new Burberry waders in the fields, their heads and faces protected by Hermes scarves and sporting designer sunshades.

[timewilltell]

I think this USA good move. The current class of tourist is very poor on the whole with package tour Chinese and Russians. The former good for 7-11 and the latter for the bars. Thailand gets relatively little benefit overall from these tourists.

Chinese are the big market here but most Chinese are lets say 'thrifty' so you will not attract them here because they do want to buy originals and not copies but want to buy them cheaply. They want the 'face' value of the real thing at a knock down price. The better class Russians might also be tempted. These people will spend more money eating out and so on.

I also think Thailand needs to be much less protectionist because I cannot see it helps the economy much. The relaxation of work rules and residency would entice any people to start businesses here which would provide gainful employment and begin to train the workforce to compete internationally. Right now many Thais are just too ill educated and work shy to ever compete and the time is coming where Thailand cannot continue to support such a backward society as it has.

The entrenched xenophobia here will resist every change and that is an unfortunate byproduct of the fact that Thailand was not colonized by Westerners though thoroughly colonized by the Chinese.

[ginjag]

This will be of great benefit to any rice farmer or rubber planter looking for luxury goods.

However for the majority of people in Thailand it will be just another day in paradise.

Yes, I think it will, imagine the pleasure the farmers will feel when wearing their new Burberry waders in the fields, their heads and faces protected by Hermes scarves and sporting designer sunshades.

And all 4 on the old Honda wave, half drunk cigs lit, going to the farm. Will be carrying a bottle of water, sticky rice, tin of sardines.

[bangon04]

Today's press release from the Thai Ministry of Random Statistics......

thinly disguised as journalism..

Edited September 13, 2013 by bangon04

[jmccarty]

Isn't there a growing middle class and expat residents with money to spend that might benefit both importers and themselves and stop buying this stuff when they themselves go touristing around or on business in Hong Kong and/or Singapore?

I have bought 2 >$5k watches in Singapore in the past 5 years and zero in Thailand.

Also buy all of the wifes perfume in Singapore duty free, saves >50%

[h90]

And for import tools and machines from europe ore USA you pay tax and freight like a idiot.

yes for machines you pay 1 %....that is what I paid on the last CNCs.

For tools it was 10 %.