Cabinet approves plan to tax foreign e-commerce firms

The Cabinet of Prime Minister Prayut Chan-o-cha approved plans to levy a value-added tax on e-commerce sales in Thailand by global tech companies such as Amazon and Google, a decision in line with steps taken by other countries.

The value-added-tax (VAT) of 7 percent would still need to be approved by parliament. The lawmakers usually follow the Cabinet’s lead. Thai e-commerce companies have already been paying the tax for many years, and so its advocates view it as a way to level the playing field with competitors from overseas.

Deputy government spokeswoman Ratchada Thanadirek told reporters that taxing local companies while not taxing foreign companies engaged in the same commerce or services is unfair.

Thanawat Malabuppha, president of the Thai e-Commerce Association, said he supported the tax, and that anyone doing business in Thailand, online or not, should pay taxes to the country.

Global e-commerce companies have opposed such local taxes on their sales, and countries in the region had been reluctant to enact those taxes for fear of constraining economic growth. But more countries are beginning to impose them.

In Southeast Asia, Indonesia passed a law last month requiring internet companies to pay VAT on sales of digital products and services. In the Philippines, the parliament has a bill before it to tax digital services.

Some analysts have said that the Covid-19 pandemic has been a driving force in governments adopting such taxes. Public health shutdowns have hurt economic growth, robbing governments of needed tax revenues. Meanwhile, e-commerce companies have been enjoying enormous sales increases because more people are shopping online to avoid exposure to the coronavirus.

However, even before the pandemic, nearly 140 countries from the Organisation for Economic Cooperation and Development (OECD) began negotiating new tax rules to cope with the rise of companies such as Amazon, Facebook, Apple, and Google.

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