Ministry proposes tariff cuts on over 1,100 items

4In a move designed to lower input costs for local businesses and boost value-added production, the Ministry of Finance is seeking Cabinet approval to remove import tariffs on over 1,100 items in 56 categories, reasoning the spur to production and economic activity will offset any loss of revenue, a Ministry official said last week.

Although eliminating the tariffs will drive down tax revenue by about $100 million, it will serve the interests of local manufacturers by reducing their costs for materials, especially intermediate types used in the final production stages of high-value or value-added goods, said Customs Department Director-General Kulit Sombatsiri.

The tariff reductions are in line with Thailand’s overarching policies that are supportive of free trade. The Kingdom was a driving force behind the establishment of the ASEAN (Association of Southeast Asian Nations) Economic Community, or AEC, a 10-nation free trade and investment zone with a population of over 620 million.

The AEC also has free trade agreements with China, Japan, South Korea, Australia, New Zealand and India. Thailand has also negotiated or been in discussions with several other nations around the world for bilateral free trade agreements.

Customs has set a revenue target of $3.4 billion for fiscal 2016 ending in September, and still hopes to meet that target even with the tariff cuts. In the first three months of fiscal 2016, Customs collected $864 million to surpass its target by 1.8 percent.

Customs already waives import duties for goods that local producers require as raw materials and capital goods. Intermediate materials or those in semi-production are taxed at 3 percent, and final, built-up products or ready-to-use items are taxed at a rate of 7 percent to 10 percent, depending on the category.

Kulit said that tariffs on intermediate products would all eventually be abolished because they are materials for value-added products.  Government policy is to promote value-added industry to strengthen Thailand’s competitiveness, as the Kingdom can no longer rely on exports of natural resources or low-cost labor in manufacturing to drive growth and maintain an edge on emerging economies in the region and beyond.

Besides new tariff rates, Customs is also aiming to improve efficiency in many areas of trade facilitation. One measure it is implementing is to apply standard prices to imported goods.

Standardizing prices requires officials to survey several markets so that importers are taxed based on fair market prices. Applying standard prices for taxation purposes will reduce mistakes made by misjudgments of Customs officials.