Thailand wants to force tech giants to pay digital transaction tax

Thailand is considering forcing online giants, such as Amazon.com Inc. and Facebook Inc., to charge value-added taxes on e-commerce sales, echoing an Indonesian restriction on rate-circumventing transactions.

Thai cross-border shopping across global online markets, as well as expanding domestic sales in the so-called social commerce sector, should be taxed. But foreign providers are not always aware of these obligations, and many Thai people who sell informally via social media shun them.

"Our laws simply can't keep up with market trends," Pinsai Suraswadi, chief advisor to the Thai Revenue Department, said in an interview on Tuesday in Bangkok. “Current rules place the customer's responsibility in paying us value added tax. But in reality, it's hard to collect. ”

Governments from Indonesia to Mexico say large amounts of online sales and profits are not taxed properly and are intensifying efforts to enforce their claims.

Legislation to bridge the gap could reach the Thai parliament by the end of the year, Pinsai said, adding that officials are also considering taxing gains from Thailand-derived internet platforms.

Thailand may place the burden on Internet platforms to ensure that the 7% consumption tax is collected and sent to the government, Pinsai said. A separate digital services fee may be imposed on the earnings derived from these companies in Thailand, he said. The rate has not yet been decided.

Facebook declined to comment on Thailand's efforts to enforce its rules. Amazon has not responded to a comment request.

Taxes on goods and services, such as the value-added tax, account for more than half of Thailand's tax revenue, according to a report by the Organization for Economic Cooperation and Development.

The country has collected 806 billion baht ($ 27 billion) of value added tax on 2018, according to official data. Pinsai said applying the charge to e-commerce will generate additional revenues in excess of “many billion baht” but declined to provide an exact figure.

The Thai e-commerce industry could be worth $ 18 billion to 2025 and its broader Internet economy could triple to $ 50 billion from the current $ 16 billion, according to Google research, Temasek Holdings Pte and Bain & Co.

However, these numbers do not cover social commerce due to the lack of reliable data. Social commerce refers to the growing purchases of goods and services through Line, Facebook and Instagram, where buyers can bargain over price and often avoid value added tax as the industry is relatively new and part of the industry. of the gray economy.

Authorities should carefully consider whether taxes hurt the e-commerce industry, said Somprawin Manprasert, chief economist at the Bank of Ayudhya research division in Bangkok.

"If the government is just looking to add more revenue by imposing this tax without contemplating missed opportunities, it won't be good in the long run," he said.

Source: Bloomberg

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