• 
• 
• 

The move is aimed at preventing cheaper foreign-made beer and spirits from flooding the Thai market, which is currently the largest in Southeast Asia.

At present, beer is subject to an ad valorem tax of 60 per cent based on value or Bt100 per litre of pure alcohol (Bt1 per one-degree proof or about Bt2 per one-percentage point of alcohol by volume) - whichever is higher.

However, most imported beverages are under-invoiced so the ad valorem rate will not be effective in managing consumption once the domestic market gets liberalised under the Afta scheme.

On January 1, the country's import duty on alcoholic beverages will be cut down to zero, therefore nullifying the customs tariff.

However, alcoholic beverages |are not ordinary products because they have a serious impact on society in terms of public health and safety.

In this context, the excise tax should be used to manage domestic consumption.

As a result, the Excise Department has tentatively proposed that the excise ceiling on beer based on pure alcohol content should be increased from the current Bt100 per litre of alcohol to Bt463 per litre (or Bt4.63 per one-degree proof).

The fourfold increase means a large bottle of beer, which could cost as little as Bt10 per bottle when imported, can be subjected to an excise duty of more than Bt50 per bottle (if it has 6-per-cent alcohol by volume or is about 12-degrees proof).

On the other hand, an under-invoiced imported beer subject to the maximum 60-per-cent rate ad valorem will pay just Bt6 per bottle if the import value is Bt10.

This would allow foreign firms with production facilities within Asean to dump their products into the vast Thai market, causing negative impacts on domestic producers as well as on society.

Besides beer, the government should also consider raising the excise ceiling on distilled white spirits and whisky based on their alcohol content, while introducing |a standardised median price for each of the alcoholic beverage categories.

For beers, they now come in economy, standard and premium standards, making it difficult to manage overall consumption via the use of excise tax based on alcohol content.

The standardised median price policy can also be applied to white spirits and whisky so that products with higher alcohol content are subject to higher taxes, not the other way around.

In the past, consumption of white spirits, with high degree proofs, in Thailand was relatively elevated because they were subject to a relatively low tax, thus making it cheap for the poor and other low-income groups to turn to.

Over the past several years, many of these consumers have switched |to low-priced or economy beers, which, however, have higher alcohol content than standard or premium types.

In other words, the excise system is distorted, which means it's time to have it restructured, especially as the country opens up the beer and liquor market to fiercer competition under the Afta scheme.