Foreign platform flood drains Thai cash as SMEs face 40% fee squeeze

Thailand loses out as foreign platforms drain cash

Thailand’s growing dependence on foreign digital platforms is raising fresh concern over whether the country is slowly surrendering economic value to businesses based overseas.

What began as a shift towards convenience, ordering meals by phone, buying cheap goods online or paying monthly for streaming services, has become part of everyday life for millions of Thais. But behind that convenience, economists and business groups are warning of a deeper problem: a vast stream of money moving out of the country through foreign-owned platforms that now sit between Thai consumers, small businesses and the wider economy.

The concern is no longer limited to consumer behaviour. It now touches capital flows, tax collection, competition, industrial survival and the future of Thai small and medium-sized enterprises.

Critics say Thailand is increasingly exposed because foreign platforms have become embedded in almost every part of daily spending, from food delivery and e-commerce to digital entertainment. Money that would once have circulated through local shops, local logistics networks and community businesses is now being routed through platform operators that collect fees, commissions and advertising revenue before transferring profits back to their parent companies.

Data cited in the debate show the scale of concern. Bank of Thailand figures have been used by analysts to point to post-Covid capital outflows of around US$3 billion to US$4 billion per quarter over a period of more than two years. Some assessments have linked part of the movement to informal gold trading, but economists also point to cross-border online transactions and profit repatriation by foreign platforms as newer forms of money flow that are harder for traditional monitoring systems to capture.

At the heart of the problem is the business model used by major platform operators.

Many entered Thailand with aggressive “cash burn” strategies, absorbing heavy losses in the early years to attract users, restaurants, merchants and delivery partners. Discount campaigns, free delivery offers and subsidised promotions helped build scale quickly and pushed smaller rivals out of the market.

Once those platforms secured dominant positions, the cost structure began to change.

Food delivery and e-commerce operators now commonly charge sellers a commission known locally as a GP fee, often calculated from gross sales. For many restaurants and online merchants, that fee can reach 30-35% of sales. But the commission is only the first layer of cost.

Merchants may also face payment-processing fees, campaign participation costs and, increasingly, advertising fees. For many sellers, visibility on a platform is no longer optional. Without paid promotion, their shops can disappear from search results or fall behind competitors that spend more to stay in front of customers.

When those costs are combined, some Thai merchants may end up paying more than 40% of their sales value back to the platform. Business operators also complain that foreign e-commerce platforms have continued to adjust fee structures regularly, leaving small sellers with little bargaining power and shrinking margins.

The imbalance has become more visible as platform companies move into profitability.

Figures cited in the industry debate for 2025 show three large foreign platform operators generating more than 160 billion baht in combined revenue from the Thai market, with combined net profit of 7.304 billion baht. That contrasts sharply with the position of many Thai SMEs, which are under pressure from higher raw material prices, rising labour costs and intense price competition. Some business groups warn that many small operators have reached a point where “the more they sell, the more they lose”.

The problem is not simply that foreign companies make money in Thailand. The deeper concern is that too little of the value created in the Thai market remains in the domestic economy.

Money that could have circulated through local supply chains, supported small businesses or generated tax revenue is instead transferred to overseas parent companies. For Thai merchants, the platform often becomes both the marketplace and the toll gate.

The tax system has struggled to keep pace.

Thailand has already moved to collect value-added tax from foreign electronic service providers and digital platforms. Under the e-Service VAT framework, non-resident electronic service providers and platforms that earn more than 1.8 million baht from services used by non-VAT registered customers in Thailand must register for VAT through the Revenue Department’s VES system.

The measure appeared successful in its early phase. In the first six months of implementation, Thailand collected about 4.261 billion baht in e-Service VAT from foreign digital operators, according to earlier tax collection data cited in Thai reports.

But VAT is an indirect tax. In practice, foreign platforms can pass the cost on through higher service prices, commission structures or seller fees. That means the burden often returns to Thai consumers and small businesses rather than being absorbed by the platform operators themselves.

The larger revenue loss lies in corporate income tax.

Under conventional international tax rules, a foreign company is generally liable for corporate income tax in Thailand only if it has a permanent establishment in the country, such as a branch, office or employees directly generating revenue. This creates a gap in the digital economy, where a platform can serve millions of Thai users, collect fees from the Thai market and remain legally structured in a way that limits its taxable presence.

Even when large platforms set up entities in Thailand, critics say they are often registered as marketing, support or consulting units rather than as the main revenue-generating business. Profit can then be booked elsewhere, while the Thai entity reports only limited income.

This is where base erosion and profit shifting, or BEPS, becomes a key concern. The OECD describes BEPS as tax-planning strategies used by multinational enterprises to exploit gaps and mismatches in tax rules to shift profits to low- or no-tax locations. For developing economies that rely more heavily on corporate income tax, the impact can be especially serious.

For Thailand, the result is a double disadvantage. Foreign platforms can reduce their effective tax exposure while Thai platforms and local companies remain subject to domestic tax obligations. That widens the competitive gap and weakens the ability of Thai businesses to build scale in their own market.

The pressure is also spreading beyond platform fees into manufacturing and trade.

E-commerce is no longer merely an online storefront. It has become a direct route from overseas factories to Thai consumers. That shift is especially visible in the rise of cheap goods from China, which some economists describe as a “China Shock 2.0” for Thailand.

Platforms such as Temu, Shein and TikTok Shop have expanded aggressively by offering low-priced goods, fast delivery and entertainment-driven shopping formats. Temu’s factory-to-consumer model, which focuses heavily on unbranded goods sent directly from manufacturers to buyers, removes many middlemen and allows prices to be pushed down sharply. Group-buying features and flash-sale mechanics can drive prices even lower.

For Thai SMEs and manufacturers, that creates a brutal comparison. Imported goods sold through digital platforms can arrive at prices below the production costs faced by local factories. The result is not just lost sales, but a structural challenge to Thailand’s role as a manufacturing base.

Industry data already point to strain. The Federation of Thai Industries reported that 667 factories closed in the first half of 2024, an average of 111 closures per month, highlighting the pressure on Thai manufacturing from weak demand, rising costs and cheap imports.

The fear is that without stronger intervention, Thailand could gradually lose its position as a producer and become increasingly dependent on imported goods sold through foreign-owned platforms.

Part of the problem came from a long-standing tax loophole for low-value imports.

For years, imported goods valued at no more than 1,500 baht benefited from de minimis treatment, allowing them to enter without import duties and, for a period, without VAT. The rule was originally designed to reduce administrative costs for small parcels, but the rapid growth of cross-border e-commerce turned that exemption into a major competitive advantage for foreign sellers.

Research by the Puey Ungphakorn Institute for Economic Research shows that low-value imports, especially from China, accelerated quickly alongside the expansion of cross-border e-commerce. The institute noted that goods from China accounted for more than 80% of Thailand’s low-value imports, while more than 70% of such goods entered by road during 2023-2025, reflecting the growing importance of low-cost land logistics routes.

The China-Laos-Thailand logistics corridor has made it easier and cheaper to move huge volumes of small parcels into Thailand. Even where each order has a low value, the combined volume can reshape the online retail market and undercut domestic sellers.

Thailand has since moved to close the loophole.

From January 1, 2026, overseas imported goods valued from the first baht are subject to 7% VAT and import duties, ending the previous low-value exemption for goods under 1,500 baht. The reform is intended to create fairer conditions for Thai SMEs and is expected to generate more than 3 billion baht a year in additional state revenue. Customs authorities have also moved to connect data systems with major e-commerce platforms to improve tax collection and compliance.

The measure was designed to protect Thai SMEs from low-cost imports, particularly from China, and that the government was seeking cooperation from online platforms in collecting duties.

Even so, economists warn that tax measures alone may not be enough.

Large foreign operators and Chinese suppliers with deep pockets may choose to absorb part of the new tax burden in order to keep prices low. That would allow them to continue competing aggressively, force weaker Thai SMEs out of the market and potentially raise prices later once competition has been reduced.

The policy challenge for Thailand is therefore bigger than VAT or import duty. It is about whether the country can build a fairer digital economy in which foreign platforms can operate, but not at the expense of local businesses, tax fairness and long-term economic resilience.

For consumers, foreign platforms offer speed, choice and low prices. For small businesses, they offer market access that would have been impossible a decade ago. But the same platforms can also become gatekeepers, fee collectors and channels through which domestic economic value flows offshore.

Thailand’s next test is whether it can turn digital convenience into domestic strength or whether the country will remain a market where others control the platform, collect the fees and take the profit home.

Source: Posttoday