Revenue agencies risk missing targets in FY2026 second half amid Middle East crisis

Thailand’s Finance Ministry has warned that government revenue collection in the second half of fiscal 2026 faces heightened risks from the prolonged energy crisis and conflict in the Middle East, while ruling out cuts to oil excise tax for fear of undermining fiscal stability.

Lavaron Sangsnit, Permanent Secretary for Finance, said that during the first five months of the fiscal year, from October 2025 to February 2026, the government was still able to collect total revenue in line with its target. However, an assessment of the outlook from the sixth month onwards showed that the situation would become significantly more difficult and challenging.

He said the second half of the year would be especially important because it is the period for corporate income tax collection, which reflects business performance and the broader economic picture from the previous year.

A key factor affecting the government’s ability to collect revenue is the conflict in the Middle East, which has triggered a global energy price crisis. The Finance Ministry said the crisis had already moved beyond its first scenario, in which it was expected to end within one month, and was now entering a scenario in which it could drag on for three to four months, or even longer.

“Under a crisis that is affecting the economy in this way, meeting revenue targets is extremely difficult and exhausting for every revenue-collecting department,” Lavaron said.

With the revenue outlook showing signs of growing strain, the ministry said it must be cautious about policies that could affect fiscal stability, particularly calls for the government to cut oil excise tax to ease the burden on the public.

Lavaron stressed that the government was still choosing to rely mainly on the Oil Fuel Fund mechanism to subsidise prices because it offered greater flexibility. By contrast, cutting excise tax would immediately slash government revenue by half. He warned that once an energy crisis had taken hold, care must be taken to ensure it did not escalate into a fiscal crisis as well.

The Finance Ministry reported that net government revenue in the first five months of fiscal 2026, from October 2025 to February 2026, totalled 1.04 trillion baht, just 1.28 billion baht above target. That was still 44.442 billion baht, or 4.5%, higher than in the same period a year earlier.

However, the ministry said the positive figure was supported by special items, including surplus proceeds from bond sales, late remittances from state enterprises, and a one-baht-per-litre increase in petrol and diesel taxes, which helped boost Excise Department revenue.

By agency, the Revenue Department collected 813.787 billion baht, up 2.3% from a year earlier and 960 million baht above target. The Excise Department collected 234.053 billion baht, up 8.3% and 4.623 billion baht above target, while Customs Department revenue came to 47.166 billion baht, 1.3% below target.

As for non-tax revenue, state enterprises remitted 89.068 billion baht, exceeding target by 8.674 billion baht. Even so, the government’s policy of accelerating corporate tax refunds to improve private-sector liquidity meant refunds were 21.505 billion baht, or 13%, higher than projected, leaving overall net revenue only narrowly above target.

The tightening fiscal situation makes a cut in oil excise tax to ease living costs even harder to justify, given the fragility of the revenue base.

According to Excise Department modelling, if the government were to cut tax on both petrol and diesel by one baht per litre, the state would immediately lose 2.8 billion baht a month in revenue. A three-baht cut would reduce revenue by 8.4 billion baht a month, while a five-baht cut, similar to the level used during the Russia-Ukraine war, would hit the tax base by as much as 14 billion baht a month.

If diesel tax alone were cut by seven baht per litre, the impact on revenue would also reach 14 billion baht a month, a risk the Finance Ministry said it did not want to take on under the current economic conditions.