Thailand backtracks on luxury tax cut

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Thailand shoppingOn September 8, Thailand’s government said that it will scrap import duties on designer goods such as luxury watches, clothes, perfumes and cosmetics in order to help the country compete with Hong Kong and Singapore for wealthy travelers. Both destinations already feared a “shopping war”.

On September 30, the Thai government said exactly the opposite. There will be no tax cuts on such goods as there were “too many pros and cons”. Probably someone in the finance ministry may have finally run the numbers on the tax cut, and they just didn’t add up.

There are two obvious reason why such a luxury tax cut wouldn’t have benefitted the country. Shoppers for luxury goods are not that price sensitive to come over to Thailand for a slightly less expensive Louis Vuitton bag or a Tag Heuer watch and the government would have been giving up tax revenue on existing luxury sales without getting much of an increase in overall tourist spending.

Furthermore, wealthy tourists would purchase mainly imported luxury goods to the detriment of sales of locally-made products. So if there was any increase in sales, than to the disadvantage of the Thai economy.

Instead, Thailand’s Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said luxury retailers and designer goods entrepreneurs should “adjust themselves to be able to compete in the global arena”.

The government had already “done enough” to draw foreign visitors, for example with the easing of the Visa on Arrival scheme.

Fair enough.

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Reading Time: 1 minute

On September 8, Thailand’s government said that it will scrap import duties on designer goods such as luxury watches, clothes, perfumes and cosmetics in order to help the country compete with Hong Kong and Singapore for wealthy travelers. Both destinations already feared a “shopping war”.

Reading Time: 1 minute

Thailand shoppingOn September 8, Thailand’s government said that it will scrap import duties on designer goods such as luxury watches, clothes, perfumes and cosmetics in order to help the country compete with Hong Kong and Singapore for wealthy travelers. Both destinations already feared a “shopping war”.

On September 30, the Thai government said exactly the opposite. There will be no tax cuts on such goods as there were “too many pros and cons”. Probably someone in the finance ministry may have finally run the numbers on the tax cut, and they just didn’t add up.

There are two obvious reason why such a luxury tax cut wouldn’t have benefitted the country. Shoppers for luxury goods are not that price sensitive to come over to Thailand for a slightly less expensive Louis Vuitton bag or a Tag Heuer watch and the government would have been giving up tax revenue on existing luxury sales without getting much of an increase in overall tourist spending.

Furthermore, wealthy tourists would purchase mainly imported luxury goods to the detriment of sales of locally-made products. So if there was any increase in sales, than to the disadvantage of the Thai economy.

Instead, Thailand’s Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said luxury retailers and designer goods entrepreneurs should “adjust themselves to be able to compete in the global arena”.

The government had already “done enough” to draw foreign visitors, for example with the easing of the Visa on Arrival scheme.

Fair enough.

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