Thai wine tax cut backfires: Consumption soars, state loses millions
A controversial tax exemption on imported wine in Thailand has led to a significant increase in consumption, particularly among high-income earners, while costing the government millions in lost revenue and imposing substantial social burdens.
A study conducted by Assistant Professor Mana Laksamee-arunothai and Associate Professor Chidtawan Chanakul from Kasetsart University's Faculty of Economics reveals that the policy, implemented in early 2024, reduced customs duties from 54 to 60 per cent and lowered excise tax.
This has resulted in an estimated annual revenue loss to the state of almost 600 million baht (S$23.6 million).
The research found a dramatic 300 per cent increase in consumption of wines priced between 3,001 baht and 5,000 baht within a single year.
Overall, the value of wine imports jumped by over 10 per cent compared with the previous year, with direct benefits primarily accruing to foreign wine producers. While cheaper wines (under 1,000 baht) saw negligible price drops, high-end wines became over 10 per cent cheaper, boosting demand among affluent consumers.
However, the policy's social and economic costs are substantial. The study estimates the total cost stemming from increased wine consumption, including risks from accidents, domestic violence, and impacts on children and youth, at over 10.3 billion baht.
Senator Lae Dilokvidhyarat, speaking at a recent public forum, criticised the government's decision to exempt taxes on luxury goods like wine.
He argued that it contradicts basic economic principles, leading to both lost revenue and negative public health and social consequences.
Dr Chidtawan further highlighted that alcohol consumption is a classic 'externality', imposing unintended costs on society. Governments typically use taxes and regulations to limit consumption.
She expressed concern that Thailand's government is also considering more liberal alcohol advertising, despite the country's high per capita consumption of 8 litres per year (exceeding Singapore, Japan, and Norway), and an average of 2,400 annual deaths from drink driving. THE NATION/ASIA NEWS NETWORK
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