The Finance Ministry is set to use catalogue prices as recommended retail prices, establishing a new base for excise tax calculation, says a source at the Finance Ministry.
But a representative of the American Chamber of Commerce (AmCham) argues that catalogue prices are improper and recommends the Excise Department use prices applied to calculate value-added tax (VAT).
The Finance Ministry source, who requested anonymity, said that a change in the excise tax base calculation to the recommended retail price from costs, insurance and freight (CIF) value and ex-factory price is believed to be able to provide fairness for carmakers across the board.
European and American carmakers whose assembly plants are located in free zone areas have used CIF values as the base for excise tax calculation, while the Excise Department believes that CIF values that have been used for excise tax calculations understate value by 20-30%.
The CIF has triggered charges of unfairness between carmakers located in free zones and non-free zone areas, as some makers have taken the opportunity to relocate their plants to the free zone areas.
The recommended retail prices will be able to address the problem and create fairness for all auto manufacturers, the source said.
The new excise tax law, which is pending publication in the Royal Gazette after winning National Legislative Assembly approval, will come into effect 180 days after publication. The new law will change the base for tax computations to the recommended retail prices from the existing ex-factory prices and CIF values.
Malika Bhumivarn, a partner of Bolliger & Company Consulting and an AmCham representative, said the recommended retail price is inappropriate for the computation of excise tax for cars, as it may not be the right price.
She said that some dealers may charge buyers higher prices than stated in the catalogue if they install additional equipment, or sell out-of-date models or damaged cars to buyers at discounted prices.
The Excise Department cannot apply one rule for all in setting the recommended retail prices, as each product has different details, she said, adding that the department should use the prices the Revenue Department uses in VAT calculations as the base for the excise tax calculation.
Ms Malika also urged the Excise Department to abolish its requirement for manufacturers to submit costs-of-goods reports to the department for use in setting the recommended retail prices, as the task is a burden to the private sector.
Such reports could lead to leaks of trade secret if manufacturers report details, or they may risk breaching laws if they provide too little information, she said.
Moreover, many products pass through third-party sources, making it difficult for manufacturers responsible for paying the excise tax to verify the final prices of products sold to consumers, she said.
Somchai Poolsavasdi, director-general of the Excise Department, said the new draft of the excise tax law offers enough flexibility in setting recommended retail prices, as it allows the tax-collecting department to take product costs into account.
To solve price discrimination in different provinces, the Excise Department will use average prices in setting recommended retail prices, Mr Somchai said.
He said the Excise Department does not intend to add a burden to manufacturers in reporting costs of goods, and it will permit operators to submit the same information sent to the Revenue Department.
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