Wednesday, February 21, 2024
HomethailandgeneralExploring the effort to axe duty-free stores

Exploring the effort to axe duty-free stores

Thailand is a well-known tropical destination with cheaper prices for accommodation, meals, transport and activities than in most Western countries.

Slightly less than 40 million foreign tourists visited Thailand in 2019, generating income for the country that accounts for 12% of GDP.

As tourism has gradually recovered following the end of the pandemic, arrivals are projected at roughly half the 2019 level this year.

However, the Fiscal Policy Office predicts foreign arrivals will reach around 90% of the 2019 level in 2024.

Thailand offers diverse natural and cultural attractions, but some people are enticed by the shopping options.

Upon disembarkation at Suvarnabhumi airport, tourists can visit duty-free shops in the arrival areas. There are also duty-free shops in departure areas as tourists prepare to leave the country.

However, the Finance Ministry has proposed cancelling duty-free shops for arriving passengers in an effort to encourage foreign tourists and returning Thai travellers to make purchases within the country.

The ministry recently negotiated with King Power, the sole operator of the duty-free shop concession, and the company has no objection to the proposal while continuing to pay the same concession fee.

What is the rationale for abolishing duty-free shops on arrival?

The reason for the proposal to remove duty-free shops on arrival is to support domestic shops, which do not offer tax exemption.

Regular stores in Thailand must bear the burden of both import tax and value-added tax (VAT).

“Abolishing duty-free shops in arrival areas of airports will stimulate domestic spending among locals and foreign tourists,” said permanent finance secretary Lavaron Sangsnit.

“Regular stores in the country will benefit from the policy.”

Are there other measures to stimulate domestic consumption?

Mr Lavaron said a proposed reduction of the beverage tax for imported and local wines, spirits and beers is under consideration by the Finance Ministry in an effort to bolster tourism and domestic spending.

Another proposal concerns relaxing opening hours at night entertainment venues in major tourist districts.

The cabinet agreed in principle to the three measures proposed by the ministry, aiming to prop up the country’s status as a premier destination for tourism and shopping.

The goal is to increase income and create jobs for entrepreneurs and tourism-related business such as restaurants, hotels, entertainment venues and transport service providers, he said.

The Revenue Department said it has improved the VAT refund process for tourists to reduce queues to declare goods to customs officials.

Slated to take effect on Dec 1, 2023, the new criteria should lead to an increase in the value of products that do not need to go through customs procedures, said Mr Lavaron.

The value of goods that must be shown to customs officers has increased from 5,000 baht to 20,000 baht.

This should reduce the number of tourists who must show their goods from 1.7 million people a year to about 500,000, reducing queues from 4,800 people per day to 1,400 people per day, according to the department.

The value of nine products (jewellery, gold ornaments, watches, eyeglasses, pens, smartphones, laptops, tablets and handbags) to be shown to revenue officials increased from 10,000 baht to 40,000 baht per item.

The value of carry-on goods also increased from 50,000 baht to 100,000 baht per item.

This should reduce the number of tourists who must show their goods from 120,000 people a year to about 30,000, or from 333 people per day to 84 people per day, said the department.

To qualify for the refund, goods must be purchased from stores displaying the “VAT Refund for Tourists” sign, with a value of at least 2,000 baht (VAT included) per day, per store.

Tourists who purchase goods valued at 20,000 baht or less can claim tax refunds from the Revenue Department without going through customs procedures.

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