THAILAND: End sought to excise tax breaks for telcos

Ministry wants cabinet to end ousted government's resolution

Telecom operators will no longer be able to deduct excise payments from their revenue-sharing agreements with TOT and CAT Telecom, under a change sought by the Information and Communications Technology Ministry (ICT). It wants the cabinet to scrap a resolution introduced by the ousted government, which it says deprived the state agencies of money and was introduced for suspect reasons, perhaps to weaken opposition to moves then under way to liberalise the telecoms industry.

ICT Minister Sitthichai Pokai-udom dismissed as unfair the Feb 11, 2003 cabinet resolution by the Thaksin Shinawatra government to accommodate passage of an executive decree to amend the Excise Tax Act of 2003.

The amendment damaged state enterprises, TOT and CAT Telecom, by enabling the operators to gain more revenue at the expense of the agencies.

He had discussed the matter with Finance Minister M.R. Pridiyathorn Devakula. The amendment allowed private telecom companies on state concessions to deduct their excise payments from their revenue-sharing payments with TOT and CAT, leaving the state enterprises with reduced income.

Mr Sitthichai said there were no sound reasons for the deposed government to issue such a resolution, raising doubts about the motive behind it.

There had been suspicions that the past administration might have wanted to financially weaken TOT and CAT so there would be no opposition to its plan to privatise the two state enterprises.

It was also alleged that the resolution, which came during the liberalisation of the telecoms market, would discourage foreign telecoms firms from investing in the country as they would not get such privileges.

The ICT minister said the resolution ran counter to the public interest. In particular, the two state enterprises suffered a combined revenue loss of 14 billion baht last year.

If the private telecoms companies had paid excise taxes to the two state enterprises as stated in the concession contracts, the Finance Ministry, which was a major shareholder in the two enterprises, would have received a bigger share of the revenue-sharing payment.

The ICT and Finance ministries will consult the Excise Department, the Assets Scrutiny Committee and the Office of the Auditor-General on how to get the money back from those private telecoms companies.

The two ministries also agreed to reform the telecoms sector, particularly mobile phone businesses, to create equal treatment terms for all operators as a certain giant telecom operator had advantages over other rival firms.

It gained a net profit of 20 billion baht annually, said the ICT minister.

Mr Sitthichai insisted the revocation of the Feb 11 resolution, which he described as ''undignified'', would increase fairness in trade and brighten up the investment atmosphere.

Source: AsiaMedia - 9 December 2006

Still, just the tip of the iceberg, IMHO

Just refusing to play the game and liberalise the investment potential of Thailand. The new government is stepping backwards. They need to deregulate more of the economy and set their tax collection abilities straight.

Just refusing to play the game and liberalise the investment potential of Thailand. The new government is stepping backwards. They need to deregulate more of the economy and set their tax collection abilities straight.

An interesting game indeed with interesting results, especially if you look towards South America where playing "the deregulation game" did not result in any advantages to the vast majority of the population apart from a few tiny groups and of course to their neo-sahib foreign partners. And now we see democracy in action and left-leaning politicans easily winning the vote and declaring that the game is rigged against the people. Oh, but I forgot, Thailand does not really have any left-leaning parties not nary a liberal party. As an interested bystander I must say it becomes curiouser and curiouser. Round and round she goes, and where she stops nobody knows.