And the winner is… wine
In a long-awaited move, Thailand’s Move Forward Party is proposing swinging reductions to the taxes – and there are many – on imported wine. Such measures fly in the face of official thinking which has for decades argued, dinosaur-like, in the following terms: 1) Thais do not drink wine – it is a ‘farang’ tipple; 2) the imported stuff is ridiculously expensive; 3) its consumption has a deleterious impact on the nation’s health; and 4) foreign wine competes directly with Thailand’s fledgling wine industry. OK? So let’s tax it heavily. At the very least, it thereby provides a hefty source of revenue for the nation’s coffers. Billions of baht every year.
All these factors have been used to justify the imposition of punitive taxes in the form of excise duties and import tariffs. Now, in a sensational volte-face, the Move Forward Party has demolished these decades-old regulations by proposing what they call a ‘progressive liquor bill’ – which has now been approved by Cabinet,
Plotting a route through the existing maze of regulations is not for the faint of heart. The old system is so byzantine that it is difficult for a mere mortal to calculate how much tax is actually paid on an imported bottle of wine.
But it is probably close to 300% of its value at source. One retailer’s expert assessment is that “there is, on a bottle of (imported) wine sold at B1000, over B700 in tax”.
There have been numerous attempts, some more successful than others, to circumvent these draconian regulations. As always, ‘Amazing Thailand’ has found ways of soothing these irritants. While avoidance of duty by smuggling wine has been widely practised in sea-side Phuket – without, apparently, a single noteworthy arrest since 2005 – the legal expedient adopted by big companies such as Siam Winery has been to market ‘wine’ that has been either adulterated by the addition of fruit juice, or fermented in Thailand from non-native grape juice.
Designated as “fruit wine’’, it has in the past avoided most governmental impositions precisely because it contains these fruity additives. And because it tastes like souped-up Ribena, it is popular with unsophisticated quaffers, especially those new to wine. I know one local bar in Phuket that stopped serving Thailand’s number-one selling fruit wine and went for something more up-market. Within weeks, customers were demanding the return of their favourite tipple.
TELLING THE DIFFERENCE
Historically, the appeal of fruit wine was also boosted by the fact that it was cheaper than regular wine, not only because it was subject to less punitive taxes, but because it was mostly marketed as box wine in utilitarian five-litre containers. Providentially, this Australian invention drove down prices for these boxed blends, since the contrivance not only reduced handling and transport costs, but more importantly, allowed the contents to stay potable for up to six weeks. An important consideration for bar owners.
Some of this mixing and matching is undertaken at source, but most is carried out here or in Vietnam, far from the stated country of origin – usually South Africa, Australia, the United States or Chile. The result is a double whammy. Not only are consumers ignorant about what goes into these homemade blends, they are usually unaware of where they are concocted.
Here’s where the customs tag helps. An orange label across the bottle or box top signifies a product made in Thailand; a blue tag denotes a product vinified elsewhere and imported into the Kingdom without subsequent adulteration. It is an important distinction, because in such wine-producing countries as Australia, consumer laws demand stringent laboratory analysis and a clear labelling of contents. In ‘orange tag’ Thailand, there are no such requirements. Once the big boys have become involved in the business of blending and maybe re-fermenting, a cheap and cheerful outcome is assured. Health safeguards are maybe not…
Nonetheless, these fruit wines appear to be losing ground. No longer allowed to use the appellation “wine”, the makers are now required to label their product as “juicy red” or “fruity white”. No mention of the “wine” word… And they are obliged to reveal its contents. One such ‘wine’ is labelled as made from “cabernet sauvignon grapes from South Australia” and is “fruit rich and easy drinking”. No give-away there. But remove the inviting packaging, and at the very bottom of the back label is the description: ”Imported Australian Wine and Selected Roselle”, a reference to a native species of hibiscus whose dried flowers and fruits are traditionally made into a vivid red cooling drink.
Moreover, these blends will no longer enjoy the tax breaks which formerly dealt them a trump card in the marketing stakes, but not by a substantial amount. In fact, the new regulations are not reducing the excise tax on
“local liquor” (based on volume at B150 per litre for 100 degrees of alcohol content) – an existing category which presumably includes home-produced fruit wine.
THE REAL STUFF
Back to real wine and the good news. Significant changes have just been announced by Lawan Saengsanit, Permanent Secretary to the Ministry of Finance. These reflect the views of a new prime minister and Cabinet who clearly believe that the times really are a-changing: that Thailand now has a burgeoning middle class exposed to international travel and sophisticated culinary trends as well as increasingly affluent tourists. The signs are all around us. Gourmet meals are invariably accompanied by a glass or two of wine, almost all hi-so restaurants in Phuket display a wine list, specialist wine-selling retailers are opening up everywhere.
Under pressure from this vocal generation of aspiring gourmets, and certainly aware that the lure of affordable wine is a huge shot in the arm for a long suffering tourism industry crippled by COVID, the government is offering substantial changes to the tax structure in the belief that it will enable Thailand to reach its stated goal of 34 million tourists in 2024. Yes, these measures will reduce revenue from the importation of wine, but such losses will be offset by additional holiday spending on alcohol and especially wine. Or so it goes…
Announced as a New Year gift to the nation and in particular to the tourism industry, the new dispensation will, inter alia, remove for one year the tariff on commercially imported wine, currently assessed at 54% and 60% of declared value. In addition, excise taxes on wine will be reduced from
10% to 5%. And alcoholic beverages of less than 7% will be free from any sales tax.
A complex set of measures (which may also affect VAT and municipal tax), it is difficult at this juncture to estimate the total effect on the wine drinker’s pocket. One calculation conjectures that the tax on a typical 75 centilitee (750ml) bottle of imported wine with an alcohol content of 13.5 degrees will be B101. So if the measures are satisfactorily implemented and their benefits passed on in full to the consumer – always imponderables in Thailand – then we can expect to enjoy significant reductions on each and every bottle of imported wine. Especially at the cheaper end…
CORKED
Unsurprisingly, the proposed cuts have already attracted the opprobrium of consumer groups. One non-governmental organisation, in a pronouncement that sounds like a throwback to the past, has stated that “alcoholic drinks are addictive” and can cause problems by “harming the country’s health”.
And the move has not been entirely welcomed by Thailand’s own wineries. One of the nation’s leading vineries in Khao Yai is concerned that the new measures will open the floodgates to imported wine at prices it cannot match.
Maybe there is a growing case for a protective subsidy. And it is possible that the purveyors of fruit wine, already experiencing a rougher ride from the taxman than heretofore, may find their products competing less effectively with the real McCoy.
As they say, time will tell…