Promote the SMART EXCISE strategy by using excise taxes to drive the economy.

“The main principle of excise tax is different from other taxes, which is that it can be used as a tool to change consumer behavior. The tax mechanism can be used to create incentives for consuming products and services that are environmentally friendly, socially beneficial, and healthful, and to reduce the consumption of products that exceed demand. It is a tax that drives the economy, society, and the environment.”

When discussing organizations that play a crucial role in driving Thailand's economy and society, the Excise Department is one of the key components that cannot be overlooked. As the country's second-largest revenue-generating agency, the Excise Department is not merely an organization that collects taxes, but also lays the foundation for sustainable development through its tax management.

Dr. Kulaya Tantitemit, Director-General of the Excise Department, who assumed office on October 31, 2567, gave an exclusive interview to Finance and Banking magazine stating that the work of the Excise Department is challenging because, in addition to being a revenue collection department, it also plays a role in using taxes to influence the behavior of citizens in line with the government's goal of supporting sustainable economic and social growth.

Therefore, the Excise Department's future direction has been set to not just be tax collection, but to take care of society through tax and non-tax measures, aiming to create a balance between economic, social development and environmental conservation.

 “The main principle of excise tax is different from other taxes, which is that it can be used as a tool to change consumer behavior. The tax mechanism can be used to create incentives for consuming products and services that are environmentally friendly, socially beneficial, and healthful, and to reduce the consumption of products that exceed demand. It is a tax that drives the economy, society, and the environment.”

Promote strategy
SMART EXCISE

Dr. Kulya said that after taking office, she has given the Excise Department a policy to drive the work in the same direction to achieve the department's goals with the SMART EXCISE strategy, whereby every unit within the department will set projects, plans, activities and indicators that are consistent with the department's vision, goals, policies and strategies, as well as linking them with the ministry's and the country's strategic plans in a concrete manner.

“We have given a policy to focus on effective tax collection while still adhering to the department’s goals, which are to drive the economy with excise taxes, focus on the environment, society, and good governance, and create international standards to push Thailand forward sustainably.”

The SMART EXCISE strategy consists of:

S: Sustainability refers to promoting sustainability through excise taxes, including: 1. Supporting a sustainable tax base; 2. Supporting Thailand's environmental goals by using excise taxes to promote environmentally and socially friendly products; and 3. Supporting economic growth and the competitiveness of Thai businesses.

M: Modernization refers to modernizing the tax system, increasing efficiency, and promoting compliance with the law by taxpayers. This includes: 1. Digital Transformation: improving work processes by applying modern and appropriate technologies to increase efficiency. 2. Modernizing laws and regulations. 3. Developing human resources to be knowledgeable and up-to-date with changes in both technology and law. 4. Collaborating with the private sector, the public, and other sectors.

A: Accountability refers to responsibility, promoting transparency and good governance. This includes: 1. Promoting fairness and transparency in tax collection, ensuring professional accountability to all sectors, and increasing public trust. 2. Promoting preventative and supervisory mechanisms to rigorously prevent corruption. 3. Proactively preventing and suppressing illegal tax evasion, such as integrating agencies involved in online goods and services and promoting public participation.

R: Revenue Collection refers to driving revenue growth for fiscal stability, including: 1. Focusing on improving tax collection efficiency to meet the country's fiscal needs; 2. Studying the feasibility of expanding the tax base; and 3. Supporting government policies and promoting industries that can drive economic growth while maintaining a stable revenue base.

T: Technology and Innovation-Driven means enhancing work processes through digital technology and innovation, including:

1. Applying Artificial Intelligence (AI) and Machine Learning to predict trends, predict tax compliance and support fraud detection.

2. Study and apply technology such as using blockchain to increase security and transparency in tax transactions, using QR Code in cigarettes or replacing paper stamps to create transparency/reduce corruption.

3. Using Big Data and Data analytics to forecast revenue and improve tax policies, while increasing decision-making efficiency. 4. Improving taxpayer services, such as upgrading digital portals to make tax filing, payment, or reporting information easier.

“Working honestly, transparently, reducing legal restrictions, and using technology to help make the Excise Department’s system free of loopholes will help change the image of the Excise Department a lot, making entrepreneurs more confident.”

 Proceed with excise tax reform
Keep up with the economic situation

Dr. Kulya said that in the past, the Excise Department has consistently reformed or improved laws related to tax collection management in order to be in line with government policies and the Excise Department’s strategies by increasing the efficiency of excise tax collection from currently collected products and expanding the tax base to new types of products to respond to the constantly changing economic, social, and environmental situations, including considering tax privileges for industries that the government wants to promote.

Currently, the Excise Department is studying and considering adjusting the tax structure of products in the excise tax rate category, including:

1. 1. Supporting the transition to electric vehicle industry The government places importance on the future automotive manufacturing industry, so it has continuously implemented EV3 and EV 3.5 measures since 2565, providing cash subsidies and using tax mechanisms to stimulate investment and support the entire automotive industry.

By setting conditions that participants in the measure must produce vehicles domestically to offset imports in the initial period, including requiring the use of domestically produced parts, which are conditions that can link the supply chain from small to large industries, creating employment and developing laborers into experts in modern automotive technology.

“This measure is an incentive to increase investment in PHEV, BEV and FCEV production in the country, but the production base of internal combustion engine (ICE) and HEV must be maintained gradually. This may cause the state to lose excise tax revenue from automobiles in the short term to support the restructuring of the industry in the long term, which is positive for the country’s economy as a whole.”

1. 2. Improving the excise tax structure for battery products The Excise Department is studying the adjustment of the tax structure to support efficient batteries. Currently, the battery tax is 8% for all types of batteries. The principle of adjusting the battery tax structure is to classify primary (disposable) and secondary (rechargeable) batteries.

In addition, for secondary batteries, a step-by-step rate is established, taking into account battery performance factors, measured by the number of charging cycles (Life Cycle) and specific energy per weight (Energy Density: Wh/kg), to promote the development of an efficient, long-lasting and environmentally friendly battery industry.

1. 3. Determination of carbon pricing mechanism for oil and oil products (Carbon Tax) The Excise Department has proposed the principle of setting a carbon price mechanism in excise taxes on oil and oil products, which the Cabinet has approved in principle on January 21, 2568. Currently, the draft Ministerial Regulation on Excise Tax Rates (No. ...) B.E. ... is under consideration by the Council of State.

The Excise Department has proposed setting the carbon price at 200 baht per ton of carbon, showing the carbon price mechanism as part of the excise tax rate for oil and oil products, so as not to affect the energy price that consumers have to pay. If the law comes into effect, Thailand will be the second country in ASEAN to have a mandatory carbon price mechanism, following Singapore.

In principle, the determination of the carbon price mechanism for each type of product will involve multiplying the carbon price by the greenhouse gas emission coefficient or Emission Factor of each type of oil. The Excise Department has received assistance in calculating the Emission Factor from the Department of Climate Change and Environment, which has coordinated and discussed together all along.

“In the beginning, the carbon tax will not affect consumers because it is a tax embedded in the oil excise tax. In the future, it may not be necessary to increase the carbon price per ton because if consumers use a lot of carbon, they will have to pay a lot of tax anyway. But we have to see when to separate the carbon tax from the oil tax and whether to set the same price or not. Because the overall picture in the world right now, some countries increase prices every two years, while some countries do not increase prices. It depends on the context of each country.”

1. 4. Supporting the use of ethanol in the manufacturing industry Bio Ethylene Because currently, there is a large surplus of ethanol used in the energy sector due to the government's policy to change the use of internal combustion vehicles to electric vehicles.

Therefore, the Excise Department has proposed measures to promote the use of excess ethanol supply in industries other than the energy sector, which will promote the continuous production and use of ethanol and help create added value for agricultural products used as raw materials for ethanol production.

The first industry that is being proposed for the Cabinet to consider at this time is the Bio Ethylene production industry, which is a raw material used in the production of environmentally friendly bioplastics. This has been proposed to the Cabinet for approval of the amendment of related regulations and is currently under consideration by the Cabinet.

1. 5. Relaxation of regulations to promote local liquors to promote the community economy and extend local wisdom in line with government policy. The Excise Department has therefore proposed the amendment of regulations to support local liquors to grow sustainably, generate income and create jobs for local people.

It will propose relaxing various regulations, such as improving the criteria for the distance between industrial plants and public water sources to be consistent with the conditions of the area and natural changes, by considering allowing small and medium-sized distilled liquor factories to be located less than 100 meters from public water sources, and relaxing the criteria by allowing the establishment of medium-sized community liquor factories without having to have been a small community liquor factory before.

Study of new tax collection
Confirm that it will start at the right time.

Dr. Kulya said that in the past, the Excise Department has continuously implemented policies that are in line with ESG principles, such as collecting taxes on beverages based on sugar content to reduce sugar consumption, which has been found to allow most entrepreneurs to adjust their production formulas to reduce sugar content.

It was found that after implementing the sugar tax measure, manufacturers were able to reduce the production of high-sugar beverages while producing more low-sugar beverages. The volume of beverages with a sweetness level of 14 grams/100 milliliters decreased from 819 million liters in 2560 to 46 million liters in 2566, and beverages with a sweetness level of less than 6 grams/100 milliliters increased from 90 million liters in 2560 to 4,736 million liters in 2566.

“In the past, public health agencies have campaigned for people to reduce sugar for health. However, health promotion would be more effective if financial or tax measures were also included. This has been effective for both producers who reduce sugar content because they do not want to pay high taxes, while consumers tend to choose products with less sugar because the price may be lower, which makes them more accustomed to consuming unsweetened food.”

Dr. Kulya further stated that, in addition to the sugar tax, the Excise Department is studying ways to tax several new types of products in 2568, including:

1. 1. Health Tax Policy Currently studying the collection of salt tax based on sodium content to reduce health problems caused by consuming more sodium than necessary. This is because Thais consume an average of approximately 3,600 milligrams of sodium per person per day, which is higher than the World Health Organization recommends not to consume more than 2,000 milligrams per person per day. Collecting excise tax on products with high sodium content is considered another social measure that will use excise tax to sustainably change consumer behavior.

“We think that the salt tax will be the same as the sugar tax: high sodium content will be taxed more, low sodium content will be taxed less. However, the use of tax measures must be careful to affect consumers as little as possible. We will start collecting from snacks first because we see them as products that do not need to be consumed. As for other products in the salt tax category, we are still in discussion with relevant agencies.”

1. 2. Social tax policy Currently studying the determination of tax policies to create equality for the disabled and support the aging society by providing tax benefits to certain types of vehicles that are equipped with equipment for the disabled and the elderly.
   3. Environmental tax policy Will continue to adhere to the approach that Thailand will achieve the Net Zero Emission target by 2065 by studying the approach to collect taxes on products with high greenhouse gas emissions, in addition to oil and oil products, such as coal, natural gas, and various refrigerants, using the principle of calculating the greenhouse gas emission coefficient (Emission Factor) as a criterion for calculation.

“In 2568, the Excise Department has a concept to study the collection of several new types of taxes to support the economy, society and the environment. However, the collection of taxes on new products must take into account the timing that is appropriate for the economic situation and the readiness of the industry to adapt in order not to affect the country’s competitive potential.”

Dr. Kulya said that for revenue collection, the Excise Department has a revenue collection target of 2568 billion baht in fiscal year 609,000. The Excise Department will accelerate the efficiency of revenue collection and bring more non-tax groups into the system. However, a balance must be maintained between revenue collection and responding to government policies that want to drive the economy.

“If we can reduce some of our taxes and make the economy grow more, create more jobs, the country’s tax collection will improve, which will benefit the economy as a whole. Therefore, the Excise Department’s income may be reduced somewhat if the government’s overall revenue collection can be maintained and grow.”

Read other columns in the March 2568 issue (No. 515) of the Finance and Banking Journal, available in digital format: https://goo.gl/U6OnIi

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