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Tax reprieve on Sugary drinks

Manufacturers of sugary drinks have been given more time to adjust their recipes after the government pushed back the latest hike in the excise levy for another six months.

Finance Minister Arkhom Termpittayapaisith said the cabinet on Tuesday agreed to postpone the planned increase in the excise tax on sugar-based sweeteners to March 31, 2023, from Oct 1, 2022.

The amended excise tax structure on beverages came into force in 2017, adding a levy on sugar-based sweeteners on top of the excise duty charged to beverages. The added excise tax on sugar-based sweeteners gradually increases over four phases, which is intended to help entrepreneurs adjust to the higher tax burden.

Thailand has applied the new tax structure to sugary drinks, cigarettes, alcoholic beverages and imported wine since Sept 16, 2017. The levy on sugary drinks is capped at 20%, with beverages containing more sugar carrying a larger tax burden than less sweetened beverages.

The new rates were originally meant to rise on a gradual basis over four phases: Sept 16, 2017 to Sept 30, 2019; Oct 1, 2019 to Sept 30, 2021; Oct 1, 2021 to Sept 30, 2023; and from Oct 1, 2023.

In May 2021 the government agreed to postpone the third phase of the hike for one year, from Oct 1, 2021 to Oct 1, 2022.

The government said at the time a large rise in the sugary drinks tax could directly affect consumers and hinder the recovery of beverage business operators suffering from the pandemic.

The Excise Department classified sugar content in beverages into six levels based on a volume of 100 millilitres: below six grammes, 6-8g, 8-10g, 10-14g, 14-18g, and more than 18g.

Excise Department director-general Ekniti Nitithanprapas said the tax hike on sweetened drinks is not only based on the World Health Organization’s advice, but also the Excise Department’s strategy to reduce the consumption of unhealthy food and promote a better quality of life for Thais, especially with regards to health.

Chanannat Polpathapee, executive vice-president for sales and marketing at Doi Kham Food Products Co, the manufacturer and distributor of Doi Kham fruit juice and dried fruit, said the six-month extension should help the company because at least 50% of its product portfolio is fruit juice.

The company pledged to maintain the price of Doi Kham fruit juice for as long as possible to help mitigate people’s costs of living, said Ms Chanannat.

“We’ve tried our best to cap the prices of our products during the pandemic, despite our operational costs increasing substantially because of continuously rising logistics and fuel costs,” she said.

The company is adjusting the production process and plans to expand into herbal drinks over the next few years, said Ms Chanannat.

She said Doi Kham added ready-to-cook products last month to balance its income sources, while it is adjusting its fruit juice drink formula to cope with future sugar tax hikes.

In a separate development, at Tuesday’s cabinet meeting acting Prime Minister Prawit Wongsuwon asked the finance minister to monitor the weak baht and provide necessary information to the Bank of Thailand, which supervises the currency.

Government spokesman Anucha Burapachaisri said Gen Prawit also directed Mr Arkhom to host a meeting with business operators and related private sector representatives to supply currency information and advice to the central bank.

“Although industrial sentiment improved in August, hitting an 11-month high, and the country’s economy is on the recovery path for the remainder of the year, boosted by tourism and higher consumption, there are still concerns about weakness in the currency and oil prices,” said Mr Anucha.

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