Last week we looked at the recent announcement made by the Thai cabinet that the tax on liquor will be increased, resulting in increased prices for all liquor in the country. What we didn’t know at the time of writing was how this would affect imported beer and exactly how this would be calculated and applied. Well, this week we have a bit more information for you. Unfortunately, it’s not good.
Here’s what we have been able to learn
Possibly the biggest change is the base amount from which the tax is calculated. In the previous scheme the tax was calculated based on the value the liquor left the factory at, for local brewers and distillers at least. For importers, the tax was determined by looking at costs, insurance and freight, with many importers reporting a lower ex-factory cost (the cost at which the beer left the factory) to keep prices competitive with local companies. The new tax will be calculated based on the last price paid before sale for consumption (commonly called a last wholesale price).
This means that the real price of liquor will have to be submitted before it is allowed to be sold. From there, the new tax will be calculated based on three factors: Price, alcohol content and volume. When it comes to tax related to beer, essentially what the government did is:
- Set a maximum value-based tax at 48%
- Increase the effective rate for alcohol content per liter of 100% pure alcohol to THB 300 (the effective rate is the rate you will actually pay). Because this is such a big jump, the government won’t actually ask for that rate right away. Instead, the tax rate has been set at THB 155 per liter, and will be gradually increased to THB 300.
- Set a volume-based tax at THB 8 per litre.
The government won’t tax on all three, instead it will take the higher of either the alcohol content tax or volume-based tax. There is also another ‘special tax’ added to beer that is over seven degrees (7% ABV). Beer over this threshold will be taxed an additional THB 3 per liter per degree.
What does this mean for imported beer?
Most news sources are reporting that the Excise department has set the tax rate, for beer, to 48%. This means that they will eventually be charging a tax rate of 48% on the wholesale price of beer. What this ultimately means for the consumer is a drastic increase in the price of all beer. Of course, the actual rates have not been agreed upon by the Excise department and there seems to be general mass confusion among the department and importers as to what exactly is going on.
There is so much to sort out, that most craft beer importers have actually stopped bringing beer into the country for the time being. Some have emailed us explaining what their take on the situation is and that they have orders in port cities outside of Thailand that they are waiting to bring in. Many have also noted that they will not be increasing the price of beer for the time being, at least until this gets sorted out.
Regardless of what is done, you will see an increase in the price of beer. Our best guess would be a maximum of 10-30% over the next year. We think this is a silly move as most imported liquor is already fairly expensive in this country when compared with local product.
As usual, the government provided their unique view on this increase with Somchai Pulsawas, director-general of the Excise Department, explaining that the new rates are meant to increase competitiveness of local producers against importers.
This doesn’t make any sense, in fact, the exact opposite is likely to happen. Because the taxes are increasing, importers are going to have to raise their prices. This could cause customers to turn back to the local brewers simply because they are far cheaper than imported beer. It’s highly likely that local brewers won’t see any negative impact in sales despite the increase in tax, there is also a chance they will see an increase in sales. Therefore this tax makes the craft beer importers far less competitive and may even squeeze them out of the market. Meaning no more craft beer in Thailand (worst case scenario of course).
We’d like to hear what you guys think about this increase, is it too much? What do you think the beer industry here in Thailand will look like in the years to come? Let us know!
Wish of the week
Nogne O + Terrapin – Imperial Rye Porter
Imperial porters are among the strongest beers out there. This one is no exception, coming in at 9% ABV. Made with rye grain and with a hint of black licorice, this dark bad boy isn’t for the faint of heart. If you like dark beers, this one will be right up your alley. Try it today!