Sep 4, 2013

Thai alcohol excise tax update with details

Further updates to my previous article about the new alcohol excise tax increase in Thailand.

Effective on midnight last night, the new effective tax rates on beer, wine and liquor have been approved by Cabinet. Alcohol tax will be in two parts; product value tax and alcohol content tax.



For drinkers and related shareholders
A. Beer: price will increase by about 3-7 baht per bottle and 2-3 baht per can, maximum tax remains at 60% of product value, effective tax rate per litre of pure alcohol rose to 300 baht from 100 baht before.

B. Wine: Product value below 600 baht exempt from product value-based tax. Product value above 600 baht taxed at 36% of retail value. All wine taxed at 1000 baht per litre of pure alcohol, up from 100 baht.

C. Liquor: price will increase by about 7-15% depending on type and alcohol content, more details to be revealed. Price increase for imported whiskey is noted.




The alcohol excise tax in Thailand has always been a mix of milking the cash cow, and also of protectionism by making imported alcohol less price competitive.

The impact may be minimal for cheap booze as the cost of a bottle of Singha or Chang in Thailand will still be lower than beer in other countries, especially most of the ones where tourists to Thailand come from. Globally, Thailand is still more affordable than many other countries with regards to alcohol prices, especially Singapore, which should be around the highest. If we are looking only at the particular group of booze-hunting tourists, then it is possible that they will just skip Thailand for Laos, Cambodia or Vietnam to stretch their alcohol dollars further. The folks concerned about ''reduced purchasing power'' of farmers and all, affecting sales of spirits may possibly see those farmers and rural drinkers brew their own instead!


Let me do a rough calculation here;
A 660 ml bottle of Chang beer costs roughly 50 baht. It has 6.4% alcohol content. Tax ceiling of 2000 baht per litre of alcohol content.

6.4% of 660ml gives us 44.24ml of alcohol, times 2 baht per ml alcohol content

44.24 x 2 = 88.48 baht alcohol tax on Chang Beer.

Lets compare this to a 5% alcohol content Singha beer. 

5% x 660 ml = 33 ml x 2 baht/ml = 66baht alcohol tax on Singha Beer.

Singha currently is more expensive than Chang at about 60 baht per bottle. With the maximum tax imposed, a bottle of Chang could cost 138.48 baht and a bottle of Singha, 126 baht. 


This would create a scenario whereby Singha becomes the cheaper option whereas it used to be the premium brand. It will be very possible for Chang to lose more market share to Singha. However with all things equal, after tax, the higher alcohol content beer demands a higher price.

As yet, many things are still not yet certain regarding the tax changes, the final price of your bottle of beer would likely be increased at a gradual pace towards the ceiling instead of a large one-time increase. Thus, if we believe the figures estimated by official sources, beer will most likely rise by only 3-7 baht per bottle this time round. Do note that tax revisions can come at any time in this country.




For coffee shop chatterbugs or political-showbiz watchers
''I want to assure you the tax restructuring for alcohol beverages is not aimed at boosting state revenue, but is aimed at reducing the number of alcohol drinkers. More importantly, we hope alcohol consumption will reduce during this Buddhist Lent period.'' - Finance Minister Kittiratt Na-Ranong

If he just said plainly that the tax rise was to increase state revenue and also to pay for mouldy rice, I would gladly buy the man a Chang!

It is strangely interesting when I look at them and see the right pocket in, left pocket out policies in Thailand and then realize how familiar it is to me.


Related post;
http://cluelesspunter.blogspot.sg/2013/08/thai-alcohol-tax-ceiling-rises-to-sky.html






13 comments:

  1. Edited to correct the font color for the beer calculations which were not visible earlier, apologies.

    ReplyDelete
  2. This comment has been removed by a blog administrator.

    ReplyDelete
  3. Edited comment to censor vulgarities-

    AnonymousSeptember 12, 2013 at 6:28 PM
    F- Thailand and their anti-farang policies and shitty attitudes. I've been in Cambodia for a year now and absolutely LOVE IT! The people are friendlier, more open to learning and trying new things. THEY SPEAK ENGLISH! Thailand is going to fail miserably, businesses are going to be leaving in droves (a lot already are leaving) for a more foreigner friendly place.

    ReplyDelete
  4. I welcome all opinions but please censor your swear words, thanks!

    I agree they do have discriminatory stuff like double pricing for foreigners. But as an Asian with some basic grasp of Thai Language, I have been able to cope pretty decently so far. I guess living abroad, it is a matter of fitting in to the country rather than the country trying to accommodate the foreigner. Good for you that you have discovered a friendly land in Cambodia and all the best to you.

    That aside, as an investor, all these are just part and parcel that does not affect my investing decisions. Yes, I do feel annoyed with the ridiculous rice/rubber/farm subsidies, populist policies, volatile political landscape, but there is still value to be found in the right places.

    While businesses may be leaving (in droves or not), businesses relocate all the time for all sorts of reasons. As we speak, Bank of China has just outlined its intentions to expand in Thailand.

    Deep down I do have a sickening feeling that the way the country is being run nowadays, there is a very real risk of having it all boil over one day when money runs out, what with corruption and far.

    And yet, I still believe that value exists in every place, if you know where to look. TGIF!

    ReplyDelete
  5. What you say about price comparison is not right. Beer in Thailand is expensive if you compare general cost of living against for example Europe.
    But now excise tax has been raised to an outrageous level, Thailand is no longer the hub for tourists seeking beach, beer and fun. Stupid measure.

    ReplyDelete
    Replies
    1. Tang, you are right about that observation and apologies for replying only now.

      A bottle of 330ml Beck's (~4.8% abv) costs about 70pence here(about 33baht maybe). What I should have corrected is that when you look at beer and wines, the price of wines would have increased much more, relative to beer.

      Trends change with time, there will always be another more attractive land of ''beaches, beer and fun'', which will probably last a few years before the next destination appears.

      Perhaps if I look at the point of view as a citizen or someone considering to relocate to Thailand, if such a measure is able to turn away most of the ''cheap booze/thrill-seeking crowd'', there would probably be less ''undesirables'' loitering around the sois!

      I would probably get flamed for this, but I am open to criticism!

      Delete
  6. Further agree with anonymous in a bit. Thailand is becoming a nationalistic country and laws or decrees are made daily with wet finger.
    If the bank of China takes an interest in Thailand I can assure you that things get even worse. They are part of the world bank (Rothchild, Rockefeller, Warburg, Morgan) and if you have done your homework, you know what this means. Thailand at chains to the world bank if not already.
    Beware of the real satan.

    ReplyDelete
    Replies
    1. I do not like what I see happening in their politics most of the time either.

      Governments have vested interests with each other, some intentions are made known publicly, some are veiled, I'm sure everyone is aware of this.

      I'm not really well-versed in this area/conspiracies, because even if its real, what can we do about it? Store money in tins? Buy a house and then live off the land?(That does sound VERY appealing to me when I retire!)

      I am not sure about you but I know that I am a tiny fish in the ocean, and I will swim with the flow. You and I have the freedom to participate in the capital markets!

      Delete
  7. Hi,
    Just wanted to check if the price of Red Label has increased as a result of the change in excise. If so , what is a 75cl bottle of JW Red Label retailing at in Thailand?

    ReplyDelete
    Replies
    1. Anonymous, apologies, I can't help you with that now.

      I have not kept updated with events in Thailand for awhile now but I'd guess that the price has probably increased.

      Prices of alcohol vary in supermarkets, bars, restaurants, corner shops, and what I have heard are some shortages in some of the supermarkets a few weeks back. Probably it is hoarding and they should all reflect the increase on the shelves now.

      Delete
  8. Where can one find the current excise tax rate for beer. Why? I am putting together a comparison between neighboring countries.

    Thank you,
    Paul

    ReplyDelete
    Replies
    1. hi,
      I like to now for real example, if you want order from Europa white wine because here is not good what happened than, I mean how much is tax for import from euro zone to Thailand, I mean where can find this informations if somebody now?
      thank for answered,
      david

      Delete
  9. I nead real exsam not only talking because beer is still 33 baht per can ,only singha is 35,but is thrue every year increase price slowly but rise
    same story in Europa
    better order grape from Europa and start making wine here
    if is somebody interestin for this kind of bussines please write to me on kdavorin@yahoo.com

    ReplyDelete