First-car scheme 'not intended as trade barrier'

Deputy Finance Minister Boonsong Teriyaphirom said the scheme did not represent price intervention or a discriminatory practice, and it was not implemented to create trade barriers against any trading partners. Rather, it focused mostly on buyers, rather than auto-makers.

"It is Thailand's internal measure to encourage people to have their own car. The policy is clearly focused on buyers," he said.

Commerce Ministry officials warned that Thailand could be at risk of flouting its obligations under the Asean Trade in Goods Agreement because tax rebates for first-time car buyers would create discrimination against trading partners within the Asean Free Trade Area.

"Malaysia may speak out if the scheme causes it to lose market share in Thailand, even though they are only a small player and it is a short-term measure," said a Commerce Ministry official, explaining that Malaysia could be worried about the Thai government expanding such schemes and phasing out Malaysian goods in the future.

Another senior official source at the Commerce Ministry said as well as Thailand being committed to allowing fair trade of goods among Asean member states, the first-car buyer scheme could breach the World Trade Organisation's rules against discrimination under the GATT Agreement.

Excise Department director-general Pongpanu Svetarundra said the policy had not broken the WTO agreement as tax rates had not been changed.

However, the Finance Ministry will meet car-leasing companies today to consider the details of the scheme.

The government's scheme will give tax rebates of up to Bt100,000 to first-time auto buyers from September 16 to December 31, 2012. The rebates will be paid by the Excise Department after the buyer has owned the car for one year. Payment is subject to obligatory ownership of the car for five years.

Eligible vehicles include passenger cars with an engine capacity of no more than 1,500cc and pickups costing Bt1 million or less. The vehicles must be locally assembled.

Finance Ministry officials pointed out that countries may introduce special incentives to achieve their own goals. They cited China's stimulus package in 2008, when it introduced a discount for trading-in old cars for new ones, along with tax breaks on fuel-efficient cars with engines of 1,600cc or smaller, conditional upon the cars being made in China. The country's car sales saw more than 40-per-cent growth in 2009 to more than 11 million units.

A partner in the law firm Baker and McKenzie, Wynn Pakdeejit, said Thailand had a right to enact privileges for Thai people based on public benefits. Since Thailand does not have a bilateral investment treaty with Malaysia, the first-car scheme does not discriminate against Malaysia.