Luxury tax: Heinecke congratulates Thai govt for its business savvy

[webfact]

LUXURY TAX
Heinecke congratulates govt for its business savvy
The Nation


Heinecke

BANGKOK: -- William E Heinecke, chairman of Minor International, recently wrote an open letter to Prime Minister Yingluck Shinawatra in which he applauded her government's initiatives to drive Thailand's competitiveness across many industries, especially tourism, which has put the country at an advantage in today's economic global community.

Heinecke also pointed out that the government's plan to abolish import tax on luxury goods would help reduce trade barriers and facilitate considerable growth in key income-generating sectors.

Tourism and service industries now account for 25 per cent of the country's GDP.

"Tourism to Thailand, already one of the most popular and desired destinations of the planet can now be taken to the next level as the Kingdom has the potential to become a shopping hub on par with the 5th Avenues and Orchard Roads of this world. This is long overdue and our world-class tourism and hospitality offerings need the added punch of competitive luxury shopping to remain relevant and indeed cutting-edge in an industry where diversity and affordability have become some of the notable characteristics on which travellers base their choice," he said in the letter.

Heinecke added that one example was easing the tax on wine, which is placing small operators and local producers who want to trade openly and honestly at a disadvantage. Alongside other luxury products, wine is a lifestyle product, which is becoming increasingly consumed by foreign visitors and locals as an accompaniment to food.

Reducing tax on wine will drive overall revenue channels throughout the food and beverage industry within the Kingdom. Likewise, it will also boost the quality and value of Thailand's hospitality and service sectors, he said.

Hong Kong abolished its wine tax in 2008 and established itself as the centre for the enjoyment of fine wine and cuisine on par with London and New York - a fine example of how tax reduction is a proven stimulus for increased commerce.

Another opportunity would be to have more reciprocal visa-exemption arrangements in place or the easing of visa requirements to encourage more travel to the Kingdom, thereby claiming a larger share of the forecasted 580 million arrivals to the Asia-Pacific region by 2017. The open-visa policy in countries like the Maldives has proved to be very successful, and has encouraged a host of Thai companies, including the Minor Hotel Group, to operate at its shores.

Minor International employs more than 40,000 people, encompassing many industries from retail and food to hotels and real estate, production and service.


-- The Nation 2013-10-01

[lee b]

Wine, oh yes, lets say 0.01% tax

[yourauntbob]

So they want to get rid of the one tax that actually brings in money and is disproportionately taxing the rich. I tend to be a conservative but the luxury tax in Thailand is one I agree with, without it Thailand's high society would pay basically nothing in taxes. There are multimillion dollar businesses here operating as "nonprofits" (I know a couple but will not name them) and cheating the tax man is a national sport. Compounding the problem, Thailand is a cash society so there is basically no way to track most transactions.

I just want to know how they plan to make up the revenue. Again, I am as conservative as they come but in this case I disagree taking this tax away.

[LuckyLew]

he must be looking for a diner date

PTP and savvy and smart are not words often used in the same sentence

[steelepulse]

I don't really see wine bringing in a huge amount of money in the overall scheme of things. On the other hand, how much more vat will be collected when people are now ordering more wine and good food when they go out, not too mention more wine being consumed in place of cheap low quality thai spirits.

[Tatsujin]

Heinecke also pointed out that the government's plan to abolish import tax on luxury goods would help reduce trade barriers and facilitate considerable growth in key income-generating sectors.

The one thing that he says helps is the one thing which the FM stated yesterday will NOT happen now. What a joke.

[Hockeybik]

So they want to get rid of the one tax that actually brings in money and is disproportionately taxing the rich. I tend to be a conservative but the luxury tax in Thailand is one I agree with, without it Thailand's high society would pay basically nothing in taxes. There are multimillion dollar businesses here operating as "nonprofits" (I know a couple but will not name them) and cheating the tax man is a national sport. Compounding the problem, Thailand is a cash society so there is basically no way to track most transactions.

I just want to know how they plan to make up the revenue. Again, I am as conservative as they come but in this case I disagree taking this tax away.

Hair Club guy, people will avoid and evade taxes when it costs less to NOT pay than it does TO pay. In other words, if taxes are lower, people are more likely to pay them and move on. Avoid the risk and trouble of not paying. If taxes are extremely high, people will figure out ways to not pay. If the goal of government is to collect the maximum amount of tax revenue, then lower tax rates will accomplish it. If the goal is to oppress and control their citizens and guests - well then, that is what it is. Heinecke is right, stimulate business and bring more overall business in.

[dcutman]

This guy might not want to start "counting his chickens" just yet.

[worgeordie]

This is a great idea,cut taxes ,while the debit keeps mounting !,

I don't think tourists would come to Thailand just to shop for

luxury goods, it would always be in the back of your mind,is this

product genuine,with all the counterfeit products about here.

regards Worgeordie

[noitom]

Heinecke states that Thailand can now become a shopping hub on a par with 5th Avenue and Orchard Road. Heinecke forgets the customer service and class that comes with luxury goods sold on these other venues. Heinecke also forgets the taint on Thailand for its pervasive counterfeit goods in handbags, watches, and other designer merchandise. High style and designer brands in Thailand in the big time malls like Paragon and Emporium are merely outlets for the Thai rich. They rarely if ever pay rent on their locations and are merely show pieces to draw the Thai rich and a hand full of foreigners.

The scheme to cut luxury goods tax will definitely increase business. The article states that the tourism sector now represents 25% of the Thai GDP. If the sex and prostitution trades were factored in, it's likely that the "tourism" sector would dwarf all other sectors in Thailand. As everyone knows, tourists spend considerably more money on sex than real designer bags and watches in Thailand. Reducing the luxury tax is not likely to impact sex and prostitution revenue in Thailand. Has the newspaper actually ever come to grips with estimating how much money actually flows in to the Thai domestic economy from the sex and prostitution trade?

[madmitch]

I don't really see wine bringing in a huge amount of money in the overall scheme of things. On the other hand, how much more vat will be collected when people are now ordering more wine and good food when they go out, not too mention more wine being consumed in place of cheap low quality thai spirits.

Nothing to do with revenue, that is just a front.

It's just that even a multi-millionaire like Bill Heinecke now has to think twice before ordering a bottle of wine with dinner.

[Local Drunk]

Since when is a bottle of wine, a bottle of whiskey or a BOTTLE OF BEER a luxury? They are all considered basic necessities in truly civilized societies.

[pattayaorganic]

This is a great idea,cut taxes ,while the debit keeps mounting !,

I don't think tourists would come to Thailand just to shop for

luxury goods, it would always be in the back of your mind,is this

product genuine,with all the counterfeit products about here.

regards Worgeordie

@worgeordie: In general I agree with what you say, but your understanding of tax policies and how it rates to revenues for the state is lacking.

Economists gauge the price's effect on demand as "elasticity". Luxury goods, by definition, are high elasticity products, which means their demand decreases sharply with increasing prices.

Basic economic theory proves that luxury taxes produce a net negative benefit because of losses due to reduced economic activity. It is the exact equal and opposite of minimum wage policies. Both are politically attractive but both result in net losses to society.

[Local Drunk]

This is a great idea,cut taxes ,while the debit keeps mounting !,

I don't think tourists would come to Thailand just to shop for

luxury goods, it would always be in the back of your mind,is this

product genuine,with all the counterfeit products about here.

regards Worgeordie

@worgeordie: In general I agree with what you say, but your understanding of tax policies and how it rates to revenues for the state is lacking.

Economists gauge the price's effect on demand as "elasticity". Luxury goods, by definition, are high elasticity products, which means their demand decreases sharply with increasing prices.

Basic economic theory proves that luxury taxes produce a net negative benefit because of losses due to reduced economic activity. It is the exact equal and opposite of minimum wage policies. Both are politically attractive but both result in net losses to society.

I think that your both quite right... I think I understand what worgeordie is saying and in any other country it would work, but here it only helps the people who can really afford it anyway.

[VocalNeal]

Reducing the luxury tax is not likely to impact sex and prostitution revenue in Thailand.

Except that when taking the ladies shopping they will now want real designer goods and not be satisfied with the fake ones.

[Pib]

Me thinks Khun Keinecke drinks too much cheap wine and it's affecting his thinking; reducing the luxury tax on wine would allow him to buy a better quality wine which may not affect his thinking in the same way.

Me also thinks the recent alcoholic beverage tax increase in the 15-20% ballpark will also affect my thinking and beer drinking habits; gosh, I may have start buying the cheap stuff like Archa Beer.

[DocN]

oh damn...it is early!

I read "Heinecken" and though "Oh, look...here is another thing they have no clue about, besides brewing beer!"

[lee68]

Does luxury tax also involve foreign made cars? id love to have the choice to buy a car from outside Thailand at a decent price,instead of buying a car made here with not much choice.

[sangfroid]

Has anyone checked out the prices on his Pizza Company's menus lately .....ridiculous!! At his prices, pizza in Thailand is definitely a luxury item.

[Thait Spot]

There's one thing that he's overlooking here - the PTP is already squandering all the tax income, has already taken on one massive loan for the floods and is looking to take a gigantic loan on for "infrastructure"

How does he think cutting down on tax income will help?

The balance of payments is also unhealthy and this will impact that too.

Still, I like my wine too - bring it on!!

[steveromagnino]

Heinecke forgets the customer service and class that comes with luxury goods sold on these other venues. Heinecke also forgets the taint on Thailand for its pervasive counterfeit goods in handbags, watches, and other designer merchandise. High style and designer brands in Thailand in the big time malls like Paragon and Emporium are merely outlets for the Thai rich. They rarely if ever pay rent on their locations and are merely show pieces to draw the Thai rich and a hand full of foreigners.

Except the facts do not support what you say.

Emporium, Paragon, Gaysorn, Central Embassy luxury floor rents are almost the highest in Thailand (around 2,500-3,500b per sqm, only lower than the airport (also selling luxury goods) and interestingly, MBK (because of the small spaces).

Around 50% of luxury brand sales CURRENTLY are to overseas clients, including Japanese, Chinese and Indians mostly. This is based on luxury goods research and if you visit ANY of the stores and ask, this is in the ballpark of how they will answer.

Research further demonstrates that SOME luxury buyers like buying in Thailand for the service they receive; now this is far from universal and others have major problems with the service received in certain markets; however I would put Pendulum, Hour Glass and Cortina up against any of the watch retailers in Singapore/HK for service (as a buyer). Many friends from HK and Singapore agree similarly.

There are massive counterfeit problems in Singapore, HK, China....all of which are luxury goods centers - I do not really believe that people buying counterfeit LV bags would also buy genuine ones, for the most part (yes some would, but a minority). While I know that this is a problem here, it is NOT a problem for the luxury brands, who are expanding substantially here - look at LV - from 1 store in Oriental to now 4 stores, and more on the way. Central Embassy, Emporium 2, etc etc are all being built on the basis that there is luxury goods demand beyond what the existing shopping centers can deliver. It's just that some of the brands want more (why give away tax when you can add margin) because some believe in price parity across the region. Hence the mantra: 'lower the luxury tax'.

Thailand is fairly competitive price wise in luxury watches, for example. Less competitive in leather goods. Vs Hong Kong there is almost price parity, and certainly with sales and on top credit cards for local buyers; international buyers get the VAT back also. Singapore and Malaysia slightly cheaper, but not everyone likes going abroad to buy a Boss suit for instance. More room for negotiation sometimes in Thailand, but it is item by item (for instance a beast of a Panerai in rose gold with perpetual calendar (from memory) is substantially more expensive here than in HK.)

The issue of continuing with a tax regime on things like wine is that it is NOT a rich tax at all; the truly rich (as well as alledgedly some of the wine importers) just bring it over the border and pay a fee to corrupt customs officials, resulting in the state getting no revenue at all.

For luxury goods, the tax is low and close enough that Thailand is almost competitive. Being that Heineke does Tumi, Zuma and a few other luxury brands, he obviously is going to state something that is helping his own business of luxury hospitality, retail and less so on the food (although he may have some idea on the wine side). Being that he is publically listed, my guess is he cannot play like some of his competitors and engage in parallel importing of wine, which would make his Zuma enterprise more difficult.

Leading out with a comment like 'the government are a pack of morons, now please lower the luxury tax' would probably not achieve what he wants.

Edited October 1, 2013 by steveromagnino

[TallGuyJohninBKK]

Gotta love the news here... This piece of self-serving fluff gets posted, right a day after this below:

Govt currently has no policy to reduce import tax for luxury goods: Finance Minister
By English News

BANGKOK, Sept 29 - Thailand's Deputy Prime Minister/Finance Minister on Sunday affirmed that the government has no forthcoming policy to reduce import tax for luxury goods to support Thailand becoming a shopping paradise.

Kittiratt Na-Ranong urged Thai entrepreneurs to adjust themselves and compete in the world's markets and said other measures can be implemented to attract tourists to visit Thailand, such as trade fairs, visa on arrival, and longer and/or multiple-entry visa permission for tourists.

The Minister said the reduction of import tax for luxury goods has both advantages and disadvantages, while such reduction, if applied, should have clear reasons for it.

Import duties worldwide will in the future eventually be exempted, Mr Kittirat said. The government will protect domestic goods only as long as international trade frameworks allow. (MCOT online news)

-- TNA 2013-09-29

http://www.thaivisa.com/forum/topic/671238-govt-currently-has-no-policy-to-reduce-import-tax-for-luxury-goods-finance-minister/

Edited October 1, 2013 by TallGuyJohninBKK

[harryfrompattaya]

Has anyone checked out the prices on his Pizza Company's menus lately .....ridiculous!! At his prices, pizza in Thailand is definitely a luxury item.

His pizza is great and his prices are very reasonable Mr Heinecke is a great and kind man My wife works for Pizza Company just ask him

[Pib]

Does luxury tax also involve foreign made cars? id love to have the choice to buy a car from outside Thailand at a decent price,instead of buying a car made here with not much choice.

I'd love to have the choice to buy a domestic made car at a decent price. Vehicle prices, new or used, are so high in Thailand.

Sent from my GT-I9500 using Thaivisa Connect Thailand mobile app

[FarangTalk]

he must be looking for a diner date

PTP and savvy and smart are not words often used in the same sentence

Not by bar-stool 'experts' here certainly, but Heinecke is actually a successful businessman and a Thai citizen.

Heinecke; probably the most successful farang businessman in Thailand, and possibly the most successful ever.

[GrantSmith]

The title of this article contradicts it's contents... Heinecke doesn't really congratulate them for anything... I was ready to rip into him based on the headline...

As Heinecke mentioned, if Thailand abolishes its tax on wine (or even reduces it by half), there will be a larger increase in tax revenue overall. HK is a perfect example. No sales tax + no wine tax = trade hub, simple equation Ms Shinawatra.

But when one gets tired of banging his head against a brick wall, one gets on with the job of working with what one has...

[newermonkey]

Wine, oh yes, lets say 0.01% tax

I second that & third that & totally agree. as red wine should be regarded as a health product.

Put 1,000% tax on cancer sticks though.

Edited October 1, 2013 by newermonkey

[Ulic]

Heinecke states that Thailand can now become a shopping hub on a par with 5th Avenue and Orchard Road. Heinecke forgets the customer service and class that comes with luxury goods sold on these other venues. Heinecke also forgets the taint on Thailand for its pervasive counterfeit goods in handbags, watches, and other designer merchandise. High style and designer brands in Thailand in the big time malls like Paragon and Emporium are merely outlets for the Thai rich. They rarely if ever pay rent on their locations and are merely show pieces to draw the Thai rich and a hand full of foreigners.

The scheme to cut luxury goods tax will definitely increase business. The article states that the tourism sector now represents 25% of the Thai GDP. If the sex and prostitution trades were factored in, it's likely that the "tourism" sector would dwarf all other sectors in Thailand. As everyone knows, tourists spend considerably more money on sex than real designer bags and watches in Thailand. Reducing the luxury tax is not likely to impact sex and prostitution revenue in Thailand. Has the newspaper actually ever come to grips with estimating how much money actually flows in to the Thai domestic economy from the sex and prostitution trade?

I have seen the tourism sector of GDP reported at 11% so I do not know which is correct. Perhaps the 25% quoted here is with the

sex/prostitution (same thing) factored in. I don't really know but I would be interested in an unbiased economists opinion.

(Wiki, lists the tourism sector at 6% and 3% for the sex industry)

Edited October 1, 2013 by Ulic

[drdoom6996]

he must be looking for a diner date

PTP and savvy and smart are not words often used in the same sentence

Oxymoron=SavvyPTP=Military Intelligence. The works can't go together. Hence they become an oxymoron.

[Pikeybkk]

of course, he and the minor group would be directly affected by a drop in the luxury tax, he is just brown nosing