The Customs Department collects import duties on over 9,000 items. As part of its continuing efforts to improve the tariff structure, the Ministry of Finance is in the process of preparing a comprehensive reform of the country’s tariff structure in line with the country’s development and forthcoming international commitments. Under the ASEAN Free Trade Area (AFTA) agreement, for example, import duties will have to be reduced to 0-5 percent on 85 percent of total product items, representing over 7,000 items, on January 1, 2000.
Furthermore, under the Information Technology Agreement (ITA), 153 items will be exempt from import duties. Given the difficulties faced by producers due to economic conditions and these forthcoming international commitments, the Cabinet approved a variety of tariff measures to lower costs and enhance competitiveness.
In identifying these tariff measures, the Ministry of Finance consulted with the Federation of Thai Industries and the Thai Chamber of Commerce. The measures focus on capital goods, raw materials, and products that are not being produced domestically. The measures include reduced tariffs on capital goods, raw materials, and other products.
Tariff reduction on machinery and mechanical appliances and parts; electrical machinery and equipment and parts; and measuring, checking, precision instruments and apparatus from five and 20 percent to three percent for 326 items.
* Tariff exemption on fish or crustaceans, molluscs or other aquatic invertebrates for breeding, which previously faced a tariff rate of 60 percent.
* Tariff reductions on raw materials for cosmetic, pharmaceutical, food and other industries including lanolin, jojoba oil, vitamin premix, dried glands and organs for medical use from 10 percent to five percent; and on artificial waxes and prepared waxes from 20 percent to 10 percent for 26 items.
* Tariff exemption and reduction on chemical products which are inorganic chemicals, organic chemicals, fertilisers, and miscellaneous chemical products from five and 10 percent to one percent for 148 product items; from 10 percent to five percent for 69 items; and tariff exemption on five products which previously faced a five percent import duty.
* Tariff reduction on 11 plastic items from 20 percent to 10 percent.
* Tariff reduction on lupins, alfalfa, and canola meal from 10 to 40 percent down to five percent for five items.
* Tariff exemption on five cotton items, which help to improve the quality of textile products, and which previously faced a five percent import duty.
* Tariff reduction on copper cathode from six to one percent.
* Tariff reductions on 12 iron items including Tin Mill Black Plate (TMBP) iron and Hi Carbon iron from two, 10, and 12 percent to one percent.
* Tariff exemptions on precious metals including pearl, silver, and platinum for 21 items, which previously faced import duties of one, five, and 10 percent. Tariff reductions on artificial jewelry from 30 and 60 percent to 20 percent for two items.
* Tariff reduction on other raw materials including skins and other parts of birds from 20 and 35 percent to 10 percent; on waste and scrap glass from five to one percent; and on glass rods from 10 percent to five percent for six items.
The tariff rates of three other products will be restructured in line with the new Harmonized System. The above tariff reductions and exemptions are on a permanent basis, except for the following reductions which are temporary:
* The tariff reductions on inorganic chemicals, organic chemicals, TMBP iron, and Hi Carbon iron to one percent are valid until 31 December 2003, when the tariff rates will be increased to their respective rates in the tariff structure or set at appropriate rates to be considered by the Ministry of Finance.
* The tariff reduction on copper cathode to one percent is valid until 31 December 2000, when the Ministry of Finance will re-consider the appropriate rate.
Removal of the import duty surcharge
The Cabinet has decided to remove the 10 percent import duty surcharge which has been collected since October 15, 1997 on items with a tariff rate over five percent. These measures will directly assist producers in a wide range of industries. For example, the food processing industry will benefit from the tariff reduction on TMBP iron. Producers in the pharmaceutical and cosmetic industries will benefit from lower tariffs on key inputs. The textile industry will benefit from lower cotton and chemical tariffs, while the electronics industry will benefit from lower copper cathode duties.
Furthermore, producers in general will face lowered production costs because of the reduced tariffs on chemicals and machinery. At the same time, the removal of the import duty surcharge will lessen the degree of protection provided to industry and encourage more efficient production.
Consumers will also benefit from these measures in the form of lower prices of goods. The Cabinet has mandated the Ministry of Commerce to monitor the prices of items, which have been affected by the tariff reductions.
Accelerated depreciation of fixed assets
While current tax regulations allow businesses to calculate depreciation expenses according to any generally accepted accounting method, any changes in the method used require the approval of the Director-General of the Revenue Department. In practice, the majority of businesses currently employ the straight line method of depreciation.
To encourage private investment and enhance the productivity of the private sector, under the measure approved by the Cabinet, businesses can now freely choose the double declining balance method of depreciation, by which assets can be depreciated at twice the rate of the straight line method. Furthermore, businesses can fully depreciate the remaining book value of the asset in the last accounting period of the useful life of the asset.
This measure will be applied to fixed assets such as machinery and parts, office equipment, forklifts, aircraft, boat, and other vehicles, but does not apply to passenger cars.
Elimination of export and import registration requirement for gold
On October 15, 1990, the Cabinet approved the deregulation of the export and import of gold and mandated the Ministry of Finance to amend the necessary rules and regulations accordingly. To this end, the Ministry of Finance amended regulations to allow the general public to register for licenses for the export and import of gold. To further liberalize the export and import of gold and support industries such as jewelry and electronics that require gold as an input, the Cabinet has eliminated the registration requirement.
Tariff duties on goods are levied on an ad valorem or a specific rate basis. The majority of goods imported by businesses are subject to rates ranging from five percent to 60 percent.
The majority of imported articles are subject to two different taxes: Tariff duty and VAT.
Tariff duty is computed by multiplying the CIF value of the goods by the duty rate. The duty thus determined is added to the value of the goods determined with reference to the CIF price. VAT is then levied on the total sum of the CIF value, duty, and excise tax, if any.
Goods imported for re-export are generally exempted from import duty and VAT.
Export duties are imposed on only a few items, including rice, hides, skins and leather, scrap iron or steel, rubber, teak and other kinds of wood.
Imposition of taxes
Companies are required to withhold income tax from the salary of all regular employees. A value-added tax of seven percent is levied on the value added at each stage of the production process, and is applicable to most firms. The VAT must be paid on a monthly basis.
A specific business tax is levied on firms engaged in several categories of businesses not subject to VAT, based on gross receipts at a variable rate ranging from 0.1 – 3.0 percent.
Corporate income tax is 30 percent of net profits and is due twice each fiscal year. A midyear profit forecast entails advance payment of corporate taxes.
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