The govt is broke and will have to turn to sin taxes to raise revenue

This time, smokers will probably take the first hit as Prime Minister Yingluck Shinawatra will soon get a proposal to jack up the “sin” tax on cigarettes.

Next could be a tax hike on alcoholic beverages, as well as on air-conditioners and telecom services, among others, to cover the looming tax revenue shortfall.

The fiscal year 2012 started on October 1, 2011, and ccording to a local report, the Excise Department’s tax collection has already fallen short of the government’s target by 5.9 per cent in the first five months of this fiscal year, largely because of last year’s massive floods, which hit the automobile and parts industry.

Tax collection from auto and related firms dropped by Bt11.1 billion from October 1 last year to February this year, according to the agency.

In addition, diesel tax collection was Bt2.9 billion less than the target due to the government’s decision to postpone the levy over the past several months.

The government reduced the diesel tax from about Bt5 per litre to the current Bt0.005 per litre as part of its election pledge in July last year.

As a result, it is likely that the government will have to raise the cigarette tax from 85 per cent to 90 per cent, while it is also considering reinstating the 10 per cent tax on telecom and related services, which are currently not subject to any excise tax.

If reinstated, it means your mobile phone bills will be more expensive.

Regarding air-conditioners, which are still considered a luxury item in a “hot” country like Thailand, the excise tax rate could be increased from 5 per cent to 15 per cent in order to boost the government’s tax revenue.

The Excise Department is one of the three major tax agencies, with the others being Revenue Department and the Customs Department.

Regarding the oil price issue, the mobile Cabinet meeting in the southern resort province of Phuket earlier this week decided to further extend the diesel tax break by another month to avoid raising its retail price, as more expensive diesel would affect the country’s production and transport costs.

The measure will cost the government another Bt9 billion per month. The Cabinet will review its decision again when the tax break extension expires on April 30.

The government earlier planned to reinstate the excise tax of Bt5 per litre on diesel oil in Janaury, but decided to delay the move because it could lead to a jump in production and transport costs, resulting in a higher cost of living for the general public.

At present, the diesel price is around Bt32 per litre while petrol is now over Bt40 per litre, as world crude oil prices stay in the range of US$120-125 per barrel. 

Finance Minister Kittirat Na Ranong has admitted that it has been difficult to manage retail oil prices when crude prices have stayed in the range of $125 per barrel over the past three months.

In fact, the government is now managing its oil price policy on a monthly basis, as it has already extended the tax breaks a few times.