Restructuring of the excise tax on automobiles is in the pipeline after the tax hike on cigarettes and liquors, in line with global trends aiming to limit emissions of carbon dioxide, says the Finance Ministry.
Possible tax increases on beer and wine are also under study.
Currently carmakers in Thailand are mainly serving domestic demand delayed by the devastating flood last year, Deputy Finance Minister Thanusak Lekuthai said yesterday.
“When the manufacturers fully recover from the floods and the government’s first-car scheme comes to an end, the export market next year will again be the main driver for passenger-car production,” he said.
To survive, carmakers will need to produce vehicles that meet international standards.
“The global market will force changes in car technology, we need not to use excise tax to force them first,” said Thanusak.
“The key reason the ministry has not put in place a new tax structure yet is that car manufacturers were hit hard by last year’s floods.”
Benja Louichareon, director-general of the Excise Department, said a new car tax would aim to limit the emission of carbon dioxide, instead of promoting power efficiency under the current eco-car scheme.
Under the proposed new tax structure, the lowest rates would be applied to passenger cars that discharge no more than 100 grams of carbon dioxide per kilometre. The next-lowest rate would be applied to cars not exceeding 150g/km, and the next rate to those emitting no more than 200g/km.
A punitive rate would be applied to those releasing more than 200g/km.
She said the existing tax incentives did not work as envisaged by the department. For example, those who drive passenger cars that could run on E85 (fuel that is 85 per cent ethanol) or E20 use E10 instead.
Currently, the tax rates for cars powered by E85 vary from 22 per cent to 32 per cent, depending on the level of engine power.
Hybrid-electric vehicles with no more 3,000 cubic centimetres of cylinder capacity currently enjoy the lowest tax rate of 10 per cent. Cars retrofitted for natural gas for vehicles also enjoy tax incentives.
Benja views these different tax rates as complicated and not achieving the intended goal.
The department has to consult more with auto-manufacturers before changing the tax incentives, she said, adding that she understood the industry had invested a lot of money to meet the current tax-incentive criteria.
The European Union has adopted a carbon-dioxide emission limit as the region aims to promote environmentally friendly technology.
Some carmakers have asked for an adjustment period of three to five years. Benja also said the department was studying whether to increase taxes on beer and wine. But as the rates have already reached the legal ceiling of 60 per cent of value or Bt100 per litre, the department would have to propose an amendment of the excise law to the government.